Credit Procedure Final Exam Review

Study Notes

Describes the rules for granting credit in recognition of prior learning, applying for credit, and assessing credit applications
Evaluates credit applicants using various factors, including:
General business entity
Supplier payment history
Banking relationship
Reliability of financial information
Financial analysis and trending
Credit decisions and documentation
Credit scoring techniques (Expert Opinion, Statistical, or Hybrid)
Ability to pay bills promptly
Special process for riskier accounts
Comparison to peer group companies

Includes terms of sale, terms codes, credit instructions, credit recommendations, and credit files

Defines procedures for the collections team to follow
Aims to be consistent and flexible when necessary
Includes normal procedures, collection schedule, lockbox system, advance payments, customer deductions, note arrangements, account referral, creditor's extension agreements, bankruptcy proceedings, and allowance for uncollectibles and write-offs

Defines a target market by similar characteristics such as demographics and behaviors
Refines the definition by specifying details such as shopping habits, preferred brands, and life events

Involves loan packaging, loan approval, and loans (secured and unsecured)
Secured loans use assets as collateral, while unsecured loans rely on credit history and income
Open-ended loans allow repeated borrowing, while closed-ended loans have a fixed balance that decreases with payments