The Five C’s of Credit and Collections Management
If you’ve worked in this industry long enough, you’ve probably heard of the “Five C’s of Credit”: Character, Capacity, Capital, Collateral, and Conditions.
While those are helpful when determining a customer’s creditworthiness, they don’t tell the whole story when it comes to managing credit and collections day to day.
So today, I want to introduce The Five C’s of Credit and Collections Management — the ones that actually drive results in the real world.
1️⃣ Credit
Let’s start with the obvious one.
Credit is where it all begins — credit reports, terms, and limits.
This is your front-line defense. It’s the decision-making hub. It determines how conservative or aggressive your AR strategy will be.
Set poor credit terms, and you’ll end up chasing payments.
Set smart terms based on real data, and you’ll protect cash flow before the invoice even goes out.
If you can only focus on one area of accounts receivable, focus here.
Get the credit decision right, and collections becomes a whole lot easier.
2️⃣ Customer Service
Yes, you read that right. Customer service is just as important in collections as it is in sales.
There’s a big misconception out there:
"Let’s keep A/R away from customers — they’ll only upset them."
Wrong!
The truth? A/R is one of the most customer-facing teams in the entire organization:
We open the account
We send the invoices
We handle disputes
We follow up when payments are late
A bad collections call can ruin a relationship.
But a respectful, calm, and professional call can build trust and keep the relationship strong — even while you’re asking for money.
You catch more bees with honey than vinegar.
No one knows that better than a great collector.
3️⃣ Contact
You can’t collect if you don’t contact the customer. Period.
Too many people avoid this step — even people working in collections.
Why? Because it’s uncomfortable. No one wants to be “the bad guy.”
So we rely on automation, emails, and payment portals… and hope it works.
But here’s the thing:
You extended credit. You delivered the product or service. The invoice is due.
You have every right — and responsibility — to reach out and ask for payment.
Automated reminders help. But they’re easy to ignore.
Human outreach isn’t. Especially when it’s done well.
If you’re not making contact, you’re not doing collections — you’re just crossing your fingers.
4️⃣ Calmness
It’s one thing to make the call.
It’s another to stay calm when the customer pushes back.
Calmness under pressure is what separates good collectors from great ones.
Customers may get defensive
They may make excuses
They may try to turn it around on you
Your job is to stay professional, steady, and focused. You can still be firm. You can still hold your ground. But you do it without yelling, threatening, or escalating unnecessarily.
You are the adult in the room.
You’re calm, clear, and in control.
This isn’t always easy — especially when you’re getting pressure from your own internal team, too.
But a calm, consistent tone leads to better conversations… and more payments.
5️⃣ Collecting Payment
Yes — we finally got here.
Collections is the end goal, but it’s also where you need to be the most organized.
Ask yourself:
Do we accept multiple forms of payment? (Checks, cards, ACH, wires?)
Is there a payment portal?
Do we make it easy for customers to pay?
And when customers don’t pay:
Who owns follow-up?
What’s our threshold for placing a customer on hold?
What happens when internal efforts fail?
Collections agency?
Small claims court?
Write-off?
Collections is more than just asking for a check.
It’s a structured, escalating process — and one that has to be backed by a clear plan.
🎯 Final Thought
Credit and collections is more than just managing numbers.
It’s a balance of policy, communication, empathy, and execution.
If you want to level up your A/R department, focus on mastering these five C’s:
Credit — Set smart terms from the start
Customer Service — Build relationships, not resentment
Contact — Pick up the phone and send the email
Calmness — Be the steady hand, not the loose cannon
Collections — Have a plan, follow it, and know when to escalate
Did I miss a “C” you think belongs on this list?
Let me know — I’m always open to a good conversation (especially if it starts with a paid invoice).
