The credit crunch brought about fundamental changes in how companies manage their businesses. The emphasis today is on liquidity aspects of managing the business and less on top line growth writes Jan Schneider-Maessen, from the German Credit Management Association (VfCM).
More and more companies are undertaking a value judgment by comparing the potential the risk of non-payment (client insolvency) versus potential new or additional sales volume. The VfCM has recently published the results of a Germany wide study on credit management practices and found that the standing of credit management has increased in importance within a company’s management hierarchy and the use of external information is increasing (see chart on the upper left hand corner).
Credit management today is facing significant challenges because the assessment of risk and the potential impact on liquidity has become more difficult. Liquidity remains a critical element in the current credit climate as customers are using longer payment terms, delinquencies are on the rise and banks are less inclined to help bridge the gap.
Chart on the opposite left indicates a trend to move to factoring rather than banking.
Source: German Credit Management Association (VfCM) 2/2009