Minding Your P’s & P’s

Minding Your P’s & P’s

The Importance of understanding Credit Philosophy and the relationship with Policy and Process

Much is spoken and written about the importance of Credit Policy and Process, but much less of the importance of Credit Philosophy. This is surprising, since defining and understanding of an organisations philosophy is (or should be) at the very heart of the establishment and effective operation of any credit function. Indeed, the formation of Policy and the adopting of Process and Procedures should be a linear progression after the establishment of The Philosophy. Therefore, The Policy should be the manifestation of the Philosophy and Process should be the execution of Policy on a day to day basis.

How the Philosophy is Defined and by whom

Credit Management is not responsible for developing but should be major influence in its’ evolution. This is the sole prerogative of the business leaders. Most organisations are Sales led, some are Finance led and occasionally some are product led. The leaders or drivers are the custodians of the Philosophy and should be encouraged to be so by Credit Management. The basic definition of Credit Philosophy is:

“How does the Organisation feel about its’ customers and how does it want them to be treated”

This incredibly simple statement belies its’ significance and the depth of considerations that it

  • It is the responsibility of Credit Management to Educate the business leaders and organisation as a whole in the evolution of the Philosophy
  • It requires to be recognised that the Philosophy may differ significantly between different Organisations

  • It requires to be recognised that Philosophy may differ from time to time within one Organisation in client approach. Examples of this would be market penetration, product launch, sales campaigns or Cash Flow Planning

Once the Philosophy is in place with variations recognised it is the responsibility of Credit Management to keep the whole organisation abreast of the Philosophy and either write or amend the Credit Policy to be completely in line with the Philosophy.

Why is it critical that this concept is understood and the approach adopted?

One of the classic mistakes that can be made by newly appointed or qualified Credit Managers is that, in their enthusiasm to apply their new skills and cement their position is to either write or rewrite The Credit Policy of the Organisation. Undoubtedly, this document will be well written and contain all the salient elements that amount to effective operational controls that should lead to tight Collection and Risk Management. However, no matter how well-crafted this document might be, if the question of Philosophy has not been first addressed, it will at some time in the future put the Credit Manager into direct conflict with the business leaders. When it comes to a disagreement
on Credit Terms offered, the extent of The Credit Line or Credit Stop, the Policy will be viewed as that of the Credit Manager and not the Organisation as a whole. Given that Credit and Collection is a support function to the business, this is not situation you want to find yourself in.

How to get the Business Leaders to buy into this process

When the question first is raised on the writing or updating of Credit Policy the Credit Manager MUST formally ask the business leaders to clearly articulate the Philosophy of the enterprise in relation to Credit and Collection. Almost invariably they will ask what is meant by the question. The stock answer to this is:

“How does the Organisation feel about its’ customers and how does it want them to be treated”

This will likely result in a request for further clarification or guidance and The Credit Manager must be ready to guide the business leaders in this regard. At this point there are a couple of questions that The Credit Manager will find useful to ask:

  • Do we expect our customers to abide by their contractual obligations at all times?
  • Do we want all of our customers to be treated fairly and equitably?

These are powerful questions and also leading in the sense that there is only one reasonable answer. When asked in isolation, at the formation of the Philosophy they will answer, yes. This answer will not be necessarily replicated in the heat of an operational argument when they are asked to support a policy that was not written by them and to which the feel no ownership.

At this point the business leaders will, as guided by the Credit Manager, will fashion The Philosophy and the Credit Manager will be able to Write or Amend the Policy within its’ image.

Now that the critical first step has been taken and the Credit Philosophy has been imbedded as the cornerstone of Operational Credit Management the stage is set for Credit Management to take responsibility for the creation of the Credit Policy

For the new or existing Credit Manager it is time to utilise their talent, skills, experience, education and training to create the policy that is appropriate for the enterprise that they represent. As with the Philosophy we still require to adopt a disciplined, structured and thoughtful course that follows some critical principles

  • The finished policy needs to be the Manifestation of the Philosophy at its’ inception and within any future changes. Having been instrumental in the creation of the Philosophy the Business Drivers have to equally identify with the created Policy to reflect shared ownership
  • The Policy should be a reflection of the areas within the influence of Credit and Collection that are used to control the function
  • The policy needs to articulate these areas at the highest level but not down to day to day
    activity. The structure of the Credit and Collection organisation will determine what these areas are. Clearly if the governance is being applied to Collection and Risk management organisation there will be differences if these activities are organised separately. Whether policy is being written for a centralised or decentralised function; again may necessitate differences.
  •  In terms of the volume of written word required in support of this activity these should be few but precise. Therefore, Philosophy should be contained within one to two pages and Policy within three to four pages

The larger volume of words will be contained within the third part of this endeavour. That is the creation of the Process and Procedures Manual that will be what governs the Credit and Collection Operations on a day to Day basis.

The Process and Procedure Manual (sometimes referred to as WOW (Ways of Working) should be a logical follow on from the policy and represent how the policy is executed on a day to day basis by the people working within Credit and Risk Management Functions.

At this point the writer will indulge himself a little and share with the reader some personal views as to how “process” and “process engineering” has somehow evolved from being the junior partner and servant of the Philosophy and Policy to not being the means to an end but the end in itself.

Some readers may find this an extremely confrontational statement and it is absolutely meant to beso. For most of my professional career I have been a Credit Manager at various levels in different International organisations. At one point when the organisation I worked for was taken over by another I was offered my previous role within the enlarged organisation. However, my title was to change from Credit Manager to Process Owner. I immediately declined the offer with the job titledescribed as such on the basis that Credit and Collection is not a process but rather a Profession and/or capability. My rationale is that in order to be considered as a process, all parts of the activity
require to be totally within the control of the enterprise hosting that process. When it comes particularly to Collection and indeed Risk Assessment the science fades and becomes an art. That art is persuasion; that persuasion is to make a third party comply to their contractual obligations and our expectations. Compliance remains as the customers’ gift and can in no way be considered as a
part of our process.

This is not to say process is not important, in fact it is the third and critical element of consideration in this paper and in reality should carry the greatest volume of detail but Process is the servant of Policy and Policy is the practical expression of Philosophy.

Over the years I’ve sat through numerous process engineering sessions and although they bored me rigid I do not decry their necessity. I therefore developed a personal acid test for process development.

  • The hierarchy of Philosophy, Policy and Process should always be adhered to.

  • Processes should always be as simple as possible to use and understand.

  • The output of the process is more important than the process itself.

  • The process when used should make the person who is applying the process working life easier, not more difficult

Interested members should contact Bill for further details – please email info@aicdp.global

Bill Dunlop

Jump-Starting Teams Post Covid19

Jump-Starting Teams Post Covid19

Many organisations are already struggling to get “back to normal” after the lockdowns and are
finding that they need to understand what the new “normal” and “reality” will be. This is particularly
challenging for teams but can easily be turned into an opportunity by applying High Performance
Methodology (HPM) to re-engineering the teams to better fit the post Covid19 environment.

HPM is a thoroughly tried and tested methodology used in organisational development. It is simple
to both explain and apply; it also enjoys an excellent reputation for delivering successful outcomes.
Often HPM becomes a retained template for ongoing and future organisational development and
can remain embedded within the fabric of the team, department or organisation.
The implementation is neither time consuming nor costly and consists of the following

  • One hour Introduction to Methodology with Client Management Group (On-site or On-line)
  • Two day workshop to apply methodology to team (On-site or On-line)
  •  One day review and transfer of output to client (On-site or On-line)

This workshop covers

  • History of the Methodology
  • Understanding and Creating Best in Class
  • Identifying Charters and Stakeholders
  • Creation of a Purpose Statement
  • Creation of a Mission Statement
  • Identification of Short/Medium Term Objectives
  • Identification of Scope of Processes
  • Creation of Fit Model
  • Identification QWL
  • Taking Ownership of Output
  • Future Planning

AICDP Consultancy intends to offer this consultancy to its members, free of charge for the initial one
hour introduction session. Thereafter, the members can elect to use the template to work their in
house solution or engage with AICDP to support them through the later stages on a chargeable

HPM can be applied to any team, group or organisation in any industry but this offer is focused on
Credit, Collection and Risk Management Teams.

Our Consultants have considerable experience in this area and successful engagements have been undertaken with Microsoft, Philips, Doosan, HSBC, Whirlpool and others.

Interested members should contact Claire or Bill for further details – please email info@aicdp.global

Bill Dunlop

New Affiliate Partner for AICDP

New Affiliate Partner for AICDP

The Credit Industry has gone through a raft of changes over the past 12-months, many changes have resulted in swift action, a transition to working remotely, online events and so much more. AICDP has worked hard to support Credit Professionals across all industry sectors and we have also taken the initiative to look at how we can support our members further in challenging times.

AICDP has looked at our Membership offering, online events and also the corporate Partners we work alongside to spot opportunities. With this in mind, we have welcomed Brent Cumming from Let’s Talk Credit as an Affiliate Partner and delighted to welcome him on to our Executive Board. Brent was formally introduced at our Executive Committee meeting in March 2021.

Brent has been involved in the Credit Industry for over 30 years and through his business, Let’s Talk Credit, he runs 12 industry credit risk forums across 9 industry sectors.

Brent added: “I am thrilled to be joining AICDP as an Affiliate Partner, I believe the next 12months will be an exciting time for the credit industry as the lockdown restrictions continue to ease and we begin to rebuild the U.K. economy”.

Both organisations share the same values and ethos of delivering best practice, market intelligence and industry news and we are in no-doubt that Brent and Let’s Talk Credit will be a welcomed addition to our network.

Chris Snelson said: I have known Brent for many years and have supported his Credit Forums and could see there were synergies between both of our organisations to promote the Credit Industry. I am delighted to welcome Brent to our Executive Board and look forward to seeing how we can support each other going forward.

Collections Skills Masterclass – 13th April 2021

Collections Skills Masterclass – 13th April 2021

AICDP & Bill Dunlop of Tower Associates (International) Ltd have joined forces to run Collections Skills Masterclass Training, regarded as Gold Standard for numerous multi-national corporations. Tower Associates offers over 20 years of experience in credit & delivering training to individuals and credit Teams in UK & Europe.

Our 1-Day courses are ideal for those just starting out in Collections, refresher training, or those looking to sharpen their skills with a view at advancement. Each Masterclass runs with a maximum of 12 Delegates to ensure quality interaction with the trainer.

Join us on Tuesday 13th April from 10am for a wide variety of sessions designed to give real-world examples of best-practice in Collections.

Each session is designed to run for 5-5 1/2 hours & offers:

Hands-On Learning - In person & Virtual Solutions

Results Orientated over 20 years experience

Ideal for Individuals & Credit Teams

Workshops & Practical work

Delegate Feedback:

“Thank you so much for offering us excellent training with AICDP today. I found the training extremely beneficial, enlightening and thought-provoking. It was beyond our expectation and made us feel confident in undertaking the practical part of the training.”

Includes AICDP Membership

Each ticket purchased also entitles the Delegate to AICDP Membership which offers an online community, regular events, webinars and access to our knowledge bank – https://aicdp.global

What in the World

What in the World

Since the onset of Covid19 AICDP has been working closely with our members and partners to assess our professions’ problems, solutions and thoughts, both in the short and longer-term and give voice to the issues. During these conversations, the question that was most frequently asked of me was “when do you think we will return to normal?” Since witnessing the evolution of the virus from its beginning in China, throughout South East Asia, Middle East and The Americas it has in a relatively short period of time progressively hit all of the developed economies with devastating effect. So the short answer to the question is that we will never return to normal, but we will return to “something” and as Professionals, we need to be thinking long and hard about what that “something” will look like. Perhaps it will be what many people are now referring to as “the new normal”.

Embedded in all of this, in my opinion, there will some certainties, some probabilities and many speculative considerations.

What is an absolute certainty is that the International Credit Profession will emerge from this as pivotal in the economic recovery of both businesses and national economies.   This is not only an exercise in wishful thinking from someone who believes passionately in the importance of our Profession and has fought throughout their career to elevate its profile.  It is absolutely endorsed by two critical factors.

  • It is commonly accepted that Credit and Collection come to the fore at the end of a recession and what we will be dealing with now will be a depression where a sharp and prolonged decrease in economic growth occurs. AICDP was conceived in the last quarter of 2013 in direct response to the emergence of International Credit Directors appointed over the previous five years. Given that the crash of 2008 was the catalyst for this elevation in the status of our profession, the enormity of what we are now being required to manage will certainly propel the Profession to a higher level. We will be measured by how well we acquit ourselves when managing the crisis, much as we did post 2008.
  • As governments across the world race to support their economies, very much a common theme is that grants and loans are being made to give them the liquidity to survive. No other profession is so focused on and better understands the importance of cash. Although enterprises can for some time survive without profits they can survive for no time without cash. We will continue to exercise our skills in accelerating cash into our own businesses and establish how much cash we will be prepared to put at risk when supplying our existing and future customer base.

Moving on to probabilities, the greatest of which in my opinion is that a high percentage of people who have moved to home working will remain there permanently. This will not be restricted to Credit and Collection Professionals and will broadly apply to society in general. Enterprises will recognise the immense savings that can be achieved by not having big and expensive premises and that true professionals do not require to be micromanaged or subjected to close physical control. Although this raises significant questions in regards to working space, communications and distributed technology. By the time final decisions are made, we will have gone through the apprenticeship of enforced home working, we will have identified the problems, learnt to adapt, improved and perfected the technology we need to remain efficient.

For speculative considerations, we must first think of the seismic shift that will occur in the fortunes of the industries that exist with our customer base. Medical, pharmaceutical and life sciences will soar, the corresponding effect on transport by air, sea and land is likely to be the reverse. These are to name but a few and the successful Credit Professionals will have to be ready to anticipate, identify and react to these changes.

AICDP and our partners will be side by side with our members as we navigate these difficult times.

Bill Dunlop
President AICDP