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Debt Management

Cash or Credit:

who decides?

I
n the last issue of The Ship Supplier I wrote about the Any ship supplier large enough to employ separate sales
importance of having a written credit policy that can and credit personnel will need to specify who is to make credit

be easily accessed and understood throughout yourdecisions. It is easy to say the responsibility is to be shared but
organisation. After setting the parameters described in that that won’t work because one or other will dominate. So the

article, it is important to focus next on how credit decisions are credit policy must say with whom the buck stops. It is more

to be made and what tools are necessary to aid that task.common for the sales manager to have the inal decision,
For small ship suppliers, credit decisions will normally be although some companies prefer the responsibility to rest with

taken by the owner or manager. A written credit policy may the credit controller or manager. The latter option tends to be
seem unnecessary in such circumstances. However, time taken popular with companies where the pay of sales staff is directly

to put a policy down on paper will be well spent, as it will serve linked to turnover. However, it too easily results in friction
as a useful aide-mémoire and speed-up decision making in between the two departments.

doubtful cases.Having held both sales manager and credit manager
For larger companies, especially those with a branch positions, I think there is a solution that keeps everyone happy:

network, who should take credit decisions is a more complex the inal say rests with sales for all new business but credit calls
question. An important consideration will be the level of the shots on any account with unpaid invoices past due date.

automony granted to branches and the extent to which they That way sales is incentivised to seek good quality business and
ensure customers keep to agreed payment terms. The credit
and the head ofice have knowledge of each other’s activities.
It is generally considered preferable for decisions to be taken department is also not undermined by sales continuing to be

as close to the customer as possible. If branches must refermade to customers in default.
all credit decisions to head ofice for approval, this is likely to It is worth reminding everyone of the impact bad debts

demotivate employees and make them less likely to look for have on proitability. For a company making a nett 5% proit,
new opportunities. However, head ofice must have conidenceadditional sales of 20 times any amount written-off must be

in the abilities of local personnel and maintain effective over- generated to keep that level of proitability. Knowing that
sight of branch activities.getting one credit decision wrong has the same impact as

Last year, the OW Bunker group collapsed when getting 20 right helps to focus minds. It really is better to leave
it became apparent that a Singapore-basedsome business to the competition.

subsidiary had granted excessive amounts of Whoever you entrust to make new business credit
credit to customers unable to pay. Who decisions, it is essential the credit policy limits their authority

knew what and when will be arguedto decisions below a certain sum, above which they must seek

through the courts for many senior management approval. It is also advisable that all credit
years but it is undisputeddecisions are made with the aid of a check-list which forms part

that an effective credit of the policy. I will cover what that check-list should contain in
policy was notthe next issue of The Ship Supplier. u

followed.Roger Symes, Director, Marine Debt Management, London

56The SHIP Supplier Issue 65 2015