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Credit management is essentially the procedure of granting credit, establishing the terms under which it is given, recovering that credit if it is owed, and monitoring compliance with business credit policy, among many other credit-related tasks. In terms of consumers, credit management refers to making payments on time, maintaining good records of payments made, and making sure that all credit limits are met. For business, credit management refers to the whole gamut of things that surrounds lending, managing debt, and so on. When you own your own business, managing and paying multiple debt accounts becomes a critical part of doing business.

Businesses often face situations where they have overdrawn accounts, defaulted on payments, or otherwise become in violation of their credit policy. In these cases, the company needs to apply for an extension credit from various banks and other lenders. In many cases, these companies will require the business to institute credit management policies that are in line with the specific credit policy of the lender. Because of these requirements, most businesses have difficulty maintaining proper credit management policies.

Often, it has been noted that non-payment of accounts resulted in the withdrawal of business credit privileges by the lender. This practice was found to be so widespread because many businesses were not prepared for such scenarios. Some were not able to establish good credit management practices, leaving themselves vulnerable to lenders who would then withdraw privileges. In instances such as these, it is common for lenders to extend credit policies that are difficult for businesses to comply with.

One way for a business to avoid being subjected to lender requirements is to institute good credit management practices. Good credit management involves taking steps to ensure prompt payment and recovery of outstanding debts. This means that there are strict limitations on the amount of money that can be borrowed and repaid and that outstanding debt balances are quickly brought current. A company should also make it a practice to pay invoices promptly so that collection agencies are not able to use delayed payments as legal defenses against debt collections. With timely payments, collection agencies may be forced to abandon aggressive practices such as demanding money upfront and then sending collection agency collectors to attempt to collect money from businesses that have made it tough for them to recover funds.

Lenders may also review accounts receivables to determine the amount of debt a business owes. If the amount of outstanding debt is greater than the creditworthiness of the business, the majority of lenders will deny financing. However, in some instances, lenders may provide funding to businesses if they prove to them that they are not delinquent. In this case, the borrower is still required to establish good credit management practices, but the lenders do not have the option of immediately cutting off credit privileges.

There are several additional steps that businesses can take to improve their credit management practices. These include making all payment terms for accounts receivable and accounts payable on time; paying invoices in full; paying bills on time; avoiding a number of common business expenses (such as late payments and travel expenses); and taking other steps to maintain an accurate balance on billing records. However, it is important for businesses to remember that they need to follow through with effective credit management policies even after approval of financing. Businesses should work to manage their cash flow and develop a strong collections and payment history with lenders. As a business grows, it becomes more difficult to keep up with collection activity, but diligent and prompt payers will help businesses maintain good credit ratings. In the end, a good payment policy and effective credit management practices will reap rewards, helping a business to obtain the amount of financing it needs to grow and prosper. For more details on credit management visit

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