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Credit management suffers from a perception problem.

In the minds of most business leaders, it is a back-office function. A necessary administrative overhead. Something that happens after the sales team has done the real work. Something that matters when things go wrong but is otherwise invisible.

That perception is built on a set of myths — widely held, rarely examined, and consistently expensive for the businesses that operate as though they are true.

Here are the five most costly.

Myth 1: “We’re Too Small to Need a Formal Credit Policy”

Reality: The smaller the business, the more devastating a single bad debt. A write-off that a large corporate absorbs as a line item on a P&L can be existential for a business turning over two or five million. The argument for a formal credit policy is stronger at smaller scale, not weaker. A one-page document that defines who gets credit, on what terms, and what happens when those terms are not met is available to any business of any size. The absence of it is not a feature of being small. It is a vulnerability.

Myth 2: “Our Customers Are Too Important to Credit Check”

Reality: Every important customer was once a new customer — with an unknown payment history and an unassessed credit risk. The credit check is not a statement of distrust. It is a standard commercial process that any serious business applies to any new account, regardless of the apparent quality of the relationship. Quality customers expect it and respect it. A customer who pushes back hard on a routine credit check is providing exactly the kind of early signal that makes the check worthwhile.

Myth 3: “Late Payment Is Just Part of Doing Business”

Reality: Late payment is widespread. It is not inevitable. The businesses that manage credit risk effectively — that have clear terms, that monitor accounts actively, that intervene early when payment slows — consistently achieve better payment performance than their peers in the same markets. Late payment is not a market condition to be accepted. It is a management outcome to be influenced.

Myth 4: “A Good Relationship Means We Don’t Need to Chase”

Reality: Good relationships are not incompatible with professional credit management. In fact, they are strengthened by it. A supplier that manages its credit professionally — that raises payment expectations clearly, that follows up promptly when invoices are overdue, that treats the financial side of the relationship with the same seriousness as the commercial side — commands more respect, not less. The relationships that suffer under professional credit management are rarely the ones worth preserving.

Myth 5: “We Can Sort Out the Credit Side Once We’ve Grown”

Reality: The habits a business builds in its early stages define the culture it carries into maturity. The credit culture of a business at ten million in revenue reflects the credit culture it had at two million — because the processes, the incentives, and the expectations were set when the business was smaller and have been carried forward. Waiting until the business has grown to address credit management is waiting until the problems created by its absence are significantly more expensive to resolve.

If any of these myths have been operating, unexamined, in your business — the cost of that is already visible in your debtor book.