Podcast
Questions and Answers
What is an important aspect of setting credit policies?
What is an important aspect of setting credit policies?
What is a key responsibility of the credit department?
What is a key responsibility of the credit department?
Why does the credit department monitor credit risk?
Why does the credit department monitor credit risk?
What is another responsibility of the credit department?
What is another responsibility of the credit department?
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What is a potential outcome of setting credit policies?
What is a potential outcome of setting credit policies?
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What is evaluated when determining creditworthiness?
What is evaluated when determining creditworthiness?
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Why does the credit department adjust credit limits and terms?
Why does the credit department adjust credit limits and terms?
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What is involved in managing collections activities?
What is involved in managing collections activities?
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What is the primary goal of the credit department?
What is the primary goal of the credit department?
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What is a key aspect of the credit department's role in credit management?
What is a key aspect of the credit department's role in credit management?
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Study Notes
Importance of Credit Management
- Late payments by customers have implications on a company's creditworthiness.
- Credit and debt management are essential to running a business successfully.
What is Credit Management?
- It is a company's action plan to guard against late payments or defaults by customers.
- It involves a continuous, proactive process of identifying risks, evaluating their potential for loss, and strategically guarding against the inherent risks of extending credit.
Objective of Credit Management
- To demonstrate that a company is trustworthy, reliable, and responsible with money.
Credit Management and Business Success
- Granting credit is one thing, and collection is another, requiring close collaboration between the two.
- Effective credit management is crucial to prevent late payments and defaults, which can lead to business bankruptcies.
Credit Department
- The credit department plays a crucial role in credit management by assessing and managing credit risk.
- Key responsibilities of the credit department include:
- Evaluating creditworthiness of potential borrowers
- Setting credit policies and procedures
- Monitoring credit risk
- Managing collections activities
Credit Management Process
- Granting credit to customers
- Setting payment terms and conditions
- Recovering payments
- Ensuring customers comply with the company's credit policy
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Description
Learn about the importance of credit management in running a business successfully. Understand how to guard against late payments or defaults by customers and develop a proactive process to identify risks and evaluate potential losses.
