Thwarting the Pressures of Credit Management

Article excerpt

Of all the places on earth, there is one where no one wants to go. Those who find themselves in that place feel the odds of getting out of its narrow confines are nearly insurmountable. Many executives in credit management are inhabitants of that place today. Its name is "Between a Rock and a Hard Place."

In that uncomfortable place, the inhabitants feel the pressure of two opposing forces, and it seems there are no good solutions. Governments, for example, increasingly come under pressure to add beneficial programs (usually costly and not in the budget) for their citizens; yet they also come under pressure to cut budgets and cut taxes. In credit management, there is now significant pressure both to maximize performance and to cut costs. This is the world in which credit management executives find themselves today. Those who do not believe they are now between a rock and a hard place will find themselves there in the very near future.

Fortunately, for those enlightened executives not burdened with tunnel vision, there is an excellent solution to the problem of the opposing pressure forces. Indeed, this solution thrives in such an environment and, in the process of solving the problem, it will also create new value for an organization. The solution is outsourcing.

In most organizations, credit management is an important competency, but it is not the key point by which the organization differentiates itself from its competitors. In today's competitive marketplace, senior management in forward-thinking organizations should seek ways to focus company resources--both people and money--on core competencies. Business functions increasingly come under scrutiny as to whether or not a company should continue performing all or some parts of those functions, or whether to outsource the functions to suppliers with expertise and economies of scale. Thus, credit management functions are an ideal candidate for inevitable change. Where there is ongoing pressure to perform at a higher level yet at a lower cost, outsourcing, an important but non-core process, is a valuable business tool to meet company objectives.

Making Change

The phenomenon of outsourcing has existed within credit management for a number of years, within sub-functions such as collections and ratings. On the horizon, though, we see credit management functions starting to be outsourced in total. The entire discipline will be impacted, and outsourcers who supply the entire function of credit management are now entering the marketplace. There will be both niche solutions and total solutions; outsourcing of credit management functions will be pervasive.

A new light also shines on the horizon. Through outsourcing to an application service provider (ASP), credit managers will be able to access world-class technology in effect renting applications by the seat or by the transaction, without having to purchase, install or maintain the software. ASPs are now targeting the banking and retailing industries, among others, because they provide access to the best credit management software available.

Managing Change

It is incumbent upon credit management professionals to understand this implication and how to manage the options. At a minimum, executives need to be able to utilize the point solutions. They also must be able to recognize when a total outsourcing solution is best for their company. …