Credit Management

How much does your business rely on credit management? Read our guide on how good credit management can prevent later trouble for your business.

The credit management function incorporates all of a company’s activities aimed at ensuring that customers pay their invoices within the defined payment terms and conditions. Effective credit management serves to prevent late payment or non-payment. Getting it right reinforces the company’s financial or liquidity position, making it a critical component in any business. Our blog tells you all about the importance of good credit management, the benefits, and how to create a robust platform. 

Chapter 1

The importance of credit management

Some companies do their utmost to bring in new business, but may falter at the last hurdle of ensuring that deals turn into ‘paid deals’. Over half of all bankruptcies are attributed to poor credit management – signifying its importance. Credit management involves much more than reminding customers to pay. Rather, it involves thoroughly examining and detecting possible reasons for non-payment, whether a solution or product was not delivered or even as far as the invoicing containing discrepancies. Effective credit management is a comprehensive process consisting of:

  • Determining the customer’s credit rating in advance
  • Frequently scanning and monitoring customers for credit risks
  • Maintaining customer relations
  • Detecting late payments in advance
  • Detecting complaints in due time
  • Improving the DSO
  • Preventing any bad debt from arising
Chapter 1

What are the benefits of good credit management?

Less risk of late payments

Improving cash flow

Reduces DSO (Day Sales Outstanding)

Higher available liquidity

Positive company image

Prior customer knowledge

Chapter 1

The creation process

In principle, effective credit management can involve two key steps. First, you determine your strategy and then you specify the appropriate procedures.

Step 1: Determine the strategy


  • Which customers do you accept and under which conditions?
  • Which customers do you monitor?
  • Which of them should no longer be accepted, and when is the exit period?

Step 2: Prepare appropriate procedures


  • How does your invoicing process look?
  • What is your invoice process?
  • Do you conduct a reminder by telephone?
  • When do you send a reminder in writing?
  • What does the reminder look like?
  • When do you engage a debt collection agency?
  • When will you start legal proceedings?
  • What is the role of your employees in this matter?
  • Will you choose outsourcing or in-house management?
Chapter 1

Which systems will you require?

Companies work with different applications and systems to limit the risks and update the data. These can help you in setting up and designing your credit management.

Acceptance system: Based on credit information, you determine whether a new customer is accepted or not. This can be a manual or automated process via our Check & Decide system. 

Monitoring system: This system checks the entire portfolio for continuous insight into existing customers and suppliers. Certainly relating to chain parties, the latter is essential.

Find out how to implement monitoring in your organisation

Invoicing system: Invoices may be sent manually or automated via systems such as DocuSign, and reminders must be logically aligned.

Bookkeeping system: All receivables and payables are booked in this system, which is the basis for insight into the cash flow and receivables risk.

CRM system: The Customer Relationship Management (CRM) system lists information relating to agreements, contact and contracts with customers. Complaints can also be processed in this system, for better insight into the background of non-payment.

Chapter 1

Automating receivables management

By automating your credit management, all previously mentioned systems can be interlinked. This leads to a more efficient workflow and to greater insight as it allows the user to easily generate cash flow and customer reports.

Automatically linking credit information decreases the percentage of non-paying new customers. By automatically integrating the debt collections in the process, the percentage of non-paying existing customers also decreases.

Looking to manage credit risk?

Start monitoring your customers and suppliers