How Credit Managers Build Financial Resilience for Their Businesses

In a recent episode of Extra Credit, the National Association of Credit Management’s weekly podcast, Anna Caroline Caruso, Editor-in-Chief, hosted Mike Davies, Manager of the Invoice-to-Cash Center of Excellence at BlackLine, to discuss the pivotal role credit managers play in building financial resilience for their businesses.

As organizations navigate a challenging economic landscape marked by inflation, fluctuating interest rates, and geopolitical tensions, the importance of efficient credit management and robust accounts receivable (AR) processes cannot be overstated.

Let's take a look at some of they key takeaways from the episode.

Mike Davies highlighted the critical need for businesses to prioritize financial resilience in the current economic climate. Inflation, rising interest rates, and increased borrowing costs make access to cash more crucial than ever. Managing working capital and centralizing invoice-to-cash (I2C) AR processes are essential to business continuity and resilience.

“Whether that’s inflation, interest rates, or the cost of borrowing, being able to free up working capital without the cost helps businesses be more resilient in their operations,” Davies noted.

Traditionally viewed as back-office personnel, credit managers are now recognized for their strategic importance in financial resilience. They manage one of the most significant assets on the balance sheet—debtors—and their ability to convert debtors into cash impacts the business's financial stability.

As Davies explained, “The access to cash and its impact on working capital is much more at the forefront of the CFO’s office now. A successful AR process allows the business to look at the whole end-to-end process and recognize the importance of backing the AR team and invoice-to-cash solutions.”

Businesses often face several challenges in automating their AR processes, with the attempt to automate too many tasks simultaneously being a prevalent issue. Davies emphasized the importance of understanding the end goals of automation and ensuring that automation efforts are targeted and effective. “Automating 100% of everything isn’t the cure. It’s about identifying data points, understanding customer behavior, and leveraging industry best practices.”

Over-automation without strategic focus can lead to inefficiencies and failure to deliver the desired outcomes.

Automating AR processes offers significant benefits that contribute to financial resilience. Standardizing workflows, clearly defining process outcomes, and prioritizing exceptions can streamline operations and enhance efficiency.

“The biggest benefit of automating a process is having a standardized way of working. It allows businesses to prioritize expertise where it matters most,” Davies explained. By automating routine tasks, organizations can free up resources to focus on more strategic activities, ultimately driving better financial performance.

Regularly reviewing and updating AR policies and procedures is crucial for maintaining financial resilience. Given the rapid changes in technology and customer behaviors, Davies recommends updating policies at least quarterly or every six months. “Having a process owner and regularly updating policies based on data changes is key to best practices,” he advised. Frequent updates ensure that AR processes align with current business needs and industry standards, reducing the risk of outdated practices leading to inefficiencies.

Credit managers play an indispensable role in building financial resilience for their businesses. They can significantly enhance their organizations' financial stability by efficiently managing accounts receivable processes, prioritizing strategic automation, and regularly updating policies. 

Mike Davies's insights underscore the importance of recognizing and supporting credit managers' critical contributions in today’s challenging economic environment.

For more detailed strategies and insights on improving financial resilience through effective credit management, tune in to the full episode of Extra Credit and check out the joint BlackLine NACM State of AR automation survey. These resources provide valuable benchmarks and best practices to help credit managers drive financial success in their organizations.