Strategic Credit Management: A Guide to Unlocking Working Capital

What if your credit department could unlock millions in trapped working capital? For many organizations, this potential is unrealized, constrained by a mindset that no longer serves the business.

"We have always done it this way" are the seven most expensive words in business, says Brian Morgan, Vice President of Invoice-to-Cash at BlackLine.

With over two decades of experience building an award-winning credit function, Brian's focus is on helping financial leaders transform credit management into a strategic commercial partner. This guide outlines his proven principles for achieving that transformation.

The journey begins with moving away from reactive, outdated processes toward a culture of proactive, data-driven decision-making. "If we were doing something the same way in 12 months, I would consider it a failure," Brian explains.

This mindset empowers the frontline staff—those closest to the process—to identify inefficiencies and drive innovation.

This cultural shift fundamentally transforms the credit function. The team evolves from a reactive collections department to a proactive commercial partner. They join sales and operational meetings not as a roadblock but as collaborators, asking, "How can we help you find more ways to say ‘yes’ while managing risk?"

This approach turns the department into an indispensable asset that actively contributes to growth.

Technology is the lever that turns this strategic vision into a reality with a clear and predictable ROI. The role of AI and automation is to augment your team’s capabilities, freeing them from low-value, repetitive tasks to focus on strategic analysis and high-impact activities.

This principle is at the core of BlackLine’s unified Invoice-to-Cash platform. For example, manual payment matching is a major drain on resources. BlackLine Cash Application automates this with AI, reducing manual effort by up to 85%.

This directly reduces operational costs and frees up FTEs for higher-value work, like strategic analysis and customer relationship management.

Instead of chasing every overdue invoice, teams can use BlackLine's AR Intelligence to predict payment behaviors and apply tailored collections strategies where they are needed most.

This transforms the entire approach from reactive collecting to proactive financial risk management, improving forecasting accuracy and accelerating cash flow.

Brian's experience provides five core principles for any leader aiming to build a credit function that delivers strategic value:

1. Partner with the business: Position your team as an integral part of the commercial engine. Align goals with sales and operations to break down silos and drive mutually beneficial outcomes.

2. Lead with a clear vision: Inspire your team with a picture of the future focused on strategic value. Invest in your people and empower them to innovate.

3. Focus on the 'why': When introducing technology, emphasize its purpose: to increase strategic effectiveness, not to eliminate jobs.

4. Measure what matters to the business: Move beyond purely operational metrics. Focus on indicators that directly impact the financial statements, such as improvements in working capital.

5. Cultivate relentless curiosity: Encourage your team to look outside your industry for inspiration. Brian recalls learning invaluable lessons on process improvement from a visit to a car manufacturing plant.

While Days Sales Outstanding (DSO) is a useful operational metric, it doesn’t tell the whole story of your financial health. To measure the true strategic impact of your credit function, you must focus on the indicators a CFO directly scrutinizes.

The metrics that matter most are those that directly reflect financial impact and process efficiency. These primary indicators of financial health include:

• Improvements in working capital: Directly measures the cash freed up for strategic investment.

• Reductions in aged debt past 90 days: Shows the effectiveness of your credit risk assessment and collections strategies.

• Profit released from bad debt provisions: A clear indicator of improved credit quality and bottom-line impact.

Tracking these indicators provides a far clearer picture of your team's contribution to the company's financial performance than DSO alone.

Transforming your credit function is a journey of cultural and operational change. By challenging the status quo, embracing intelligent automation, and leading with a clear vision, you can elevate your team into an indispensable strategic asset that improves working capital, reduces risk, and drives sustainable growth.

See how a unified platform from BlackLine can directly improve your working capital and reduce aged debt.

1. What is the role of strategic credit management in a business?

Its role is to act as a commercial partner that balances risk and growth. It goes beyond simple collections to actively manage financial risk, optimize cash flow, and contribute directly to the company's working capital and profitability.

2. What are the first steps to automating credit and collections?

Start by identifying the most time-consuming, manual tasks in your invoice-to-cash process, such as cash application and invoice matching. Implement a targeted solution like BlackLine Cash Application to automate these functions, which frees up your team to focus on higher-value credit risk assessment and strategic collections.

3. How do you measure the success of a credit department?

Success should be measured by its direct financial impact. Key metrics include improvements in working capital, a reduction in debt aged over 90 days, and the amount of profit released from bad debt provisions. These provide a more strategic view than traditional metrics like DSO.

4. How can sales and credit teams align without slowing down deals?

Alignment is achieved by establishing shared goals and integrating the credit function into the sales process early. By using data-driven credit risk assessment tools, the credit team can provide fast, reliable guidance, helping sales structure deals with appropriate terms and enabling the business to confidently say "yes" more often.