THE FUTURE ROLE OF THE CREDIT FUNCTION

WALTER SCOTT HUNT, Pace University

Abstract

The purpose of this study was to ascertain what the future role of the credit function would be in manufacturing industries. This prediction was to be determined by evaluating ratings of specific statements in the credit work area for past, present and future periods. A fifty statement survey was mailed to credit executives and management executives employed in the chemical industry. Two other groups were also included, faculty members and managers of credit association chapters. Three hundred and fifteen surveys were mailed and 207 anonymous responses received. The statement rankings were applied against a series of three way contingency tables. A second survey consisting of interviews among banking and business people familiar with industrial credit practices listed reasons for accepting or rejecting the implied trends. Salient points were that in the future the accounts receivable asset will be managed like other company investments to fit in with company needs and objectives. The credit department will not act as an independent unit in a company and credit departments will no longer be considered adversaries of the sales and marketing functions. An activist role will be assumed or sought out in business activities aided by an increasing favorable image of the credit department and an upgrading of staff quality. While credit work will still carry a "specialist" label, future credit department employees will come from other business and educational disciplines. Computers will facilitate greater involvement of credit personnel in business transactions and also foster credit people performing cash forecasting, estimating receivables levels for corporate planning, predicting financial impairment of customers and counseling management of financially marginal companies. While the days sales outstanding (DSO) ratio, will remain a common measurement of accounts receivable vitality, other statistics such as average days past due and average number of days credit granted will be considered more meaningful standards. Bad debt ratios probably will not be a prime measurement of a credit department's efficiency and effectiveness. There was no strong preference for either a physically centralized or regionalized form of organization for credit departments in the future and a reporting line to a treasurer was preferred over a reporting line to a controller or marketing executive.

Subject Area

Management

Recommended Citation

HUNT, WALTER SCOTT, "THE FUTURE ROLE OF THE CREDIT FUNCTION" (1983). ETD Collection for Pace University. AAI8328351.
https://digitalcommons.pace.edu/dissertations/AAI8328351

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