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Published Articles by David Balovich

Title: Is It Time To Centralize The Credit Department?
Published in: Creditworthy News
Date: 11/13/04
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.

The advanced 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 Bankruptcy.  

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