Credit card use in business-to-business transactions, while perhaps not a threat to the actual profession, signals the move to increased automation in order processing and is perhaps indicative of a speedier, less human credit decision process that's waiting just around the corner.
Still, none of these topics are imminent and immediate threats to the profession and nested in each of the articles that have addressed them is an attempt to link the commercial credit profession of yesterday to the commercial credit profession of tomorrow: how credit scoring will leave more time for more productive activity and offer a competitive edge, how outsourcing can offer labor high in both quality and value and how credit cards can be used to a great, profitable advantage.
But in the future, if these recently discussed items become ever more ubiquitous in credit departments across the country and staff numbers tend to trend downward, it might not necessarily be because credit professionals are no longer needed but because they're needed elsewhere. A number of companies, as briefly discussed in last month's feature article, have started giving credit staff a greater role in strategic decisions. Given the current global economic situation, the credit skill set is becoming a more valuable longterm planning resource.
Why Credit? Why Now?
A recent phenomenon in global economic development has been that a number of boom countries are also the riskiest places to do business. China, India and Eastern Europe are all offering American companies a wealth of opportunity for growth--as well as an opportunity to get burned by selling indiscriminately without considering the economic and political risks endemic to selling in those countries.
"For most multi-nationals, where's your growth going to come from?" asked Richard Clark, CICE, director of global credit at Ingersoll-Rand Co. "These countries are growing at 20-25%, 30%," he said. "The growth rate in the U.S. is 5-7%." Clark has recently become involved with his company's strategic planning initiatives. "We're starting to expand and develop into emerging markets," he said. "As that happens, risk and capital management become more important."
"I participate in the long-range planning process and, particularly, working capital and the amount of capital that's going to be required," said Clark. "My role is to make sure the senior leadership understands the risk and how long it takes to get paid." Clark noted that as corporations continue to grow into these high-growth, high-risk areas, the credit skill set becomes even more valuable. "If I think about what is becoming strategic to businesses, working capital and cash flow management are certainly vital," he said, adding that both of these areas are places where the knowledge of a well-seasoned credit professional can come in handy.
As the marketplace continues to grow globally, foreign exchange management skills are also becoming more important to an organization's strategic decisions. "Even for companies only selling in the U.S., these things still apply," said Clark. "Foreign exchange is important locally because you might be sourcing [or] facing competition from Europe or Asia." Depending on the strength of the dollar against certain currencies, business in certain areas and industries could be more or less susceptible to the threat of foreign competition.
Growth in these riskier nations isn't merely for the benefit of American companies bold enough to invest there, but also for companies within their own borders, and as a country's economy continues to spur greater business for its companies, credit becomes a much more sought after item. What may have once been a cash-only environment could now be a place where a number of customers are seeking credit terms and financing agreements. "As they continue to grow, customers are looking for financing terms," said Clark. When a company wants to sell to someone, and the customer is looking to finance the purchase, the credit executive is the most logical source to know what's feasible and what's foolish. …