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The Perils of a Weak Credit Management Function

Updated: Apr 14, 2021


JSP Credit Management has not simply entered the world of credit, risk, commercial debts, and financial control just to preach to everybody outside of it (and sometimes inside of it) about all the things they are doing wrong. It is aware that there are already enough people in the industry that are prepared to do that. We prefer to take a more positive approach.


In fact, so devoted is owner Joe Postings to a positive approach to his business that he has spent the last 7 years studying psychology whilst running JSP Credit Management and is planning to embark on an MSc in Work and Business Psychology in the autumn to hone his knowledge of what effective business practices actually look like from an evidence-based perspective and produce a team that is built for success.


However, what JSP Credit Management also believes in is telling the truth to its clients, even if it might be difficult to say or difficult to hear. Experience tells us that when a company takes responsibility for its cash flow and gives it the same level of emphasis that most companies give to their sales department then great things are often possible. What sort of things though we hear you ask?


We have seen companies half their debtor days, or DSO if you prefer. We have seen companies collect debts that have been overdue for more than 3 years – on 30-day payment terms no less! We have seen disputes worth millions of pounds resolved after being in deadlock for years, and we have seen debtors traced in cases where there had been no contact with them for months. The list could go on.


Those of the sort of results that we thrive off here at JSP Credit Management. But what happens when an organisation's credit management function is neglected? Under-invested in? Constantly put in AOB on team meetings, or worse still missed off meeting agendas altogether? What happens when the in-house credit control team feels undervalued and staff turnover is worryingly high? Allow us to explain….


A company going into administration or liquidation does not happen by accident and neither does it happen overnight. It is a process. A process that likely often happens long before the people who will have to answer questions by the insolvency practitioner assigned to take control of the liquidation of the company usually notice, and hopefully this might help them to notice the signs a bit sooner.


During Joe’s credit management career, he has seen some wonderful technological advances which have helped the credit management professional to become better at what they do. When Joe first started chasing outstanding debts for a small family-run independent financial advisor in 2005, it involved a basic desktop phone, a big filing cabinet full of paper-based files which he had to go through and manually look through to determine which one contained invoice’s which were overdue for payment. Needless to say, the recovery rates were nothing to write home about.


These days, the technology available makes the roles within credit management a great deal more effective and the professionals doing them, more efficient. However, JSP Credit Management still feels that an investment in a credit management function that relies purely on throwing money at fancy new systems or hardware (there are some very persuasive salespeople out there selling them!) is inadequate and is probably going to result in unrealised potential.


For us, any organisation and department are ultimately run by people, at least for now, and we believe that this very fact should be fundamental to the thinking of anybody responsible for the running of a company. Credit management can be challenging at times due to the nature of the role. It can however be made much more difficult if those that work within it feel as though their contribution to it is little more than an after-thought to the people who are arguably set to benefit the most by a robust credit management department.


Ultimately numbers talk. And according to Companies House for the period between 2019 and 2020, we witnessed the single largest increase in company dissolutions since records began in 2009 (https://www.gov.uk/government/statistics/companies-register-activities-statistical-release-2019-to-2020/companies-register-activities-2019-to-2020) and we all know what happened in that period. The moral of the story is that people's problems inevitably become business problems.


Now more than ever it is vitally important that companies take out the insurance policy that is an investment in their credit management department to safeguard them against the risk of becoming just another statistic on next year’s companies house report. Whether that be re-evaluating the efficiency of your in-house team or outsourcing to a team of professionals that have the skills and experience to do it for you, the time is now. For more information on what JSP Credit Management can offer your business visit www.jspcreditmanagement.co.uk or call us on

01827 929209.




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