The question concerning centralized vs. decentralized credit operations
has been debated for as long as I can recall and long before then I’m
certain. Business Credit, the official publication of the National
Association of Credit Management, has contained numerous articles on this
subject over the past 30 years both pro and con. Articles have also
appeared in D&B Reports and many other industry publications.
technologies and demands on management today to reduce costs have caused a
growing number of companies to centralize their credit operations. The
majority of these companies have discovered not only greater efficiency
and productivity but also improved customer service even though their
credit operations are no longer in close proximity to the customer. These
results have been achieved by consolidating credit and collection
operations into one cohesive and professional organization.
Through centralization, organizations have met
management’s concerns and reduced credit department expenses. These
reductions have been achieved by hiring credit professionals, thus
eliminating the need for excessive support personnel and requiring fewer
managers to oversee operations. Centralization has also produced an
increase in productivity never realized before at the local level. Through
centralization reports are now obtained and evaluated more quickly,
resulting in more accurate and timely information that has reduced
delinquency and increased cash flow. Credit decisions have become more
consistent and credit policies and procedures are implemented and changed
much easier within the one location.
One of the unforeseen benefits has been improved
customer relations provided through enhanced customer service. Customers
now have to call only one telephone number to be served efficiently,
regardless of their location. Centralization has enabled organizations to
grow and increase their customer base without the additional time and
expense associated with developing and staffing a new credit department.
The question facing many credit managers with
multiple credit locations today is, “Will centralizing our credit
operation be beneficial to the organization?” To assist in making that
determination we offer the following six questions to consider:
Are our resources in the
branch credit offices being utilized efficiently?
Are credit decisions
throughout the organization consistent with credit policy?
Is it simple to implement
changes and improvements within the branches?
Are all customers being
served timely and efficiently?
Can we save the organization
money and be more efficient through centralization?
How long does it take and
what is the cost to establish a new credit location?
If you are unable to answer in the affirmative to the
first four questions, now may be the right time to consider centralization
of your credit department. Many organizations that felt it necessary to
have a credit department in major cities to be in close proximity to their
customers are now realizing that productivity and efficiency is not
dependent upon location.
I wish you well.
The information provided above is for
educational purposes only and not provided as legal advice. Legal advice
should be obtained from a licensed attorney in good standing with the Bar
Association and preferably Board Certified in either Creditor Rights or