These are the questions credit managers struggle with today, day in and day out. Our research shows that while 48 percent of finance professionals prioritize the financial health of their own company in such situations, no less than 76 percent feel responsible for the impact of that same credit management policy on other organizations.
We call this responsibility Corporate Financial Responsibility (CFR). This is a newer approach to the financial process, where ethics, transparency, and social responsibility play an increasingly important role. Credit management that places Corporate Financial Responsibility at its core means managing both results and relationships. But this does create - or still creates - dilemmas:
Three Dilemmas in the Practice of Corporate Financial Responsibility
Corporate Financial Responsibility revolves around the balance between hard agreements and the relationship: paying on time, without losing the human aspect.
1. Short-term cash flow vs. long-term relationship
A loyal customer who is temporarily in trouble, do you give them a deferment or do you stick strictly to the payment agreements? Your financial ratio says one thing, your relational feeling says something else.
2. Standard policy vs. customization
Procedures ensure consistency. But what if a unique situation calls for more human action? Do you then go for customization and how do you justify this to the rest of the organization?
3. Internal KPIs vs. external impact
For every organization, a low DSO is important. But what if that pressure leads to collection measures that permanently damage your customer relationship?
There's plenty to think about. At Onguard, we believe that these dilemmas can be resolved with a CFR approach. How?
From Principle to Practice: How to Bring Corporate Financial Responsibility to Life
It can be quite abstract to envision what working in a CFR manner looks like in practice for a credit manager. And it can still be quite a task to establish clear guidelines. To support this, I share a number of practical steps that can help make CFR a structural part of the workflow:
1. Collaborate on Policy
It is important that credit managers actively discuss CFR within the team. This way, collective thought can be given to a policy in such situations and what role CFR should play in the company. Because a customer who is financially struggling is unfortunately not an exception.
Determine together with the team where and when there is room for humanity and customization in the processes. For example, in a collaboration of several years, the scope of the collaboration with the customer, or the number of outstanding invoices.
2. Document Agreements Well
Once your team has determined where exceptions can be made, it is important to document these well. This way, you have a clear overview of which adjustments you have made for which customers. This ensures transparency towards your own organization, but also towards the customer.
For this, for example, establish a registration system in which exceptions are recorded. By ensuring that the agreements are clear in advance, discussions afterwards can be avoided.
3. Integrate CFR into Team Meetings
Team meetings are often heavily focused on figures such as DSO and cash flow. This is, of course, important, but when only financial KPIs are discussed, the broader context can be lost. By also structurally pausing to consider the customer relationship and other signals such as satisfaction and how the customer communicates, the team gains a better understanding of the status of the collaboration.
If the customer usually responds quickly to emails or calls, but there is suddenly radio silence? Or are invoices being paid less well? Then it may be the next step to discuss the changed (payment) behavior with that customer and what the possible causes are.
4. Invest in Communication Skills
Credit management goes beyond numbers alone; it also requires strong human skills. By training employees in conversation techniques, empathetic listening, and constructively dealing with conflicts, they gain the right tools to conduct conversations with customers confidently.
This not only increases the ease and effectiveness of contact but also ensures that decisions are both financially responsible and relationally sustainable.
5. Evaluate the Impact
Look back at the choices made regarding the credit management policy and assess their impact. Have measures or adjustments actually contributed to maintaining a strong customer relationship? How do you notice that? And what was the influence on the financial health of your own organization?
Check whether the agreements have been adhered to, what the effect on cash flow was, what the risks were, and whether they materialized. Only adjust the policy based on this information where necessary, to ensure it remains effective.
Balance is Not a Weakness
CFR does not call for soft choices, but for conscious choices. Organizations that learn to deal with the tensions between results and relationships build trust, resilience, and sustainable relationships. As a credit manager, you play a key role in this.
Engage in discussions within your organization about Corporate Financial Responsibility and incorporate ethics into your approach towards customers. This shows that careful credit management not only has a financial function but also makes a strategic contribution to the reputation and future viability of your organization and that of the customer. Those who only focus on results primarily see the risks. But those who also focus on the relationship create lasting success for themselves and their organization.
