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Oct 01 2016 Effective Credit Committees |
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I was a session speaker at the NACM Annual Credit Congress
in June, 2016. In the session: The Challenge Of Overridden Credit Decisions, I
shared with the audience some of the changes we made at Nicholas and Company
that I believe contributed to our success in changing the culture of our
company from one of "The blame game" to a collaborative team working together
toward common goals and objectives. One of the changes we implemented was
forming a credit committee. During the session at Credit Congress, I had an
audience participant that boldly stated during the session that "Credit
Committees don't work." I was surprised with his response, and it got me
thinking. While he strongly believed that they don't work, I had a
completely opposite experience. In fact, I would contribute much of our success
on the formation and participation of the credit committee. So why such a
drastic difference? I gave it some thought and believe the reason some
credit committees are very effective and some are not, is due to the following
factors: Authority - It is imperative that all levels of management agree that credit has the final authority to extend or deny credit on all accounts with the exceptions of those that are brought to the Credit Committee. All executive level management should also have the support of the committee and give the committee final authority on the account brought to the committee. Purpose - It is important that the Credit Committee has a clearly defined purpose, a committee chair is established, and committee members are carefully selected. Members should be thoughtfully appointed and composed of five to eight members. At Nicholas, our committee consists of; Director of Credit, VP of Finance, Director of Sales, VP of Sales, and Legal Counsel. All members should agree and recognize that the final decision made by the committee is a result of a collaborated group effort and all committee members shared in the outcome. Committee Chair ability to conduct a meeting - It does require a bit of skill in conducting an effective meeting. With Sales Management in the room, it is easy to be distracted, and it is important to keep the meeting moving. Sharpen your skills in conducting an effective meeting or seek the help of a meeting monitor if needed. There are two things to consider: 1) Content knowledge and experience relevant to the work of the committee. 2) Proven leadership and people skills that will be essential if the committee is to work effectively. You want a good leader of people and processes, someone who feels confident in guiding committee members to accomplish the task promptly. In summary, I believe a Credit Committee can be effective if given proper authority and support. It is important to define the purpose of the committee and carefully select committee members and a committee chair that has the knowledge and skill to keep the meeting on task. This may be someone other than the credit professional and the attitudes of the committee members must be carefully considered. Attitudes can in fact dictate the outcome.
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