The Art of Credit Management
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The Art of Credit Management Presentation Transcript

  • 1. ER$ Consulting Services In Collaboration with CMA Presents The Art of Credit Management October 19, 2007 Las Vegas
  • 2. By Eddy A. Sumar, MBA, CCE, CICE A Fundamental Checklist for the Success of Every Credit Professional Construct Your Checklist! Gather The Ingredients!
  • 3.
    • "It is not the mountain we conquer, but ourselves."
    - Sir Edmund Hillary
  • 4. Define Credit
  • 5. Credit comes from the Latin word “credere,” which means trust. It is a mutual trust between the grantor and recipient of the credit. It involves a great deal of trust and confidence in the ability , willingness and character of a “debtor” to deliver on its promises to the “creditor,” according to agreed upon terms. Credit also implies a reciprocal trust that the creditor will deliver what was contracted or agreed upon. Thus, credit is “a cooperative function between seller and buyer or between creditor and debtor.
  • 6.
    • Credit Redefined
            • A Sales Tool
            • A Marketing Tool
            • Financial Vehicle
            • Strategic Alliance
  • 7.
    • “ Before you can score, you must first have a goal”
    “ A Fundamental Checklist” -- Anonymous
  • 8. Know Your Vision Your Goals
  • 9. Company Vision--Goals Your Dept Vision--Goals Credit and Sales—One Team Credit is a Sales & Marketing Tool Credit Department becomes a Center for Client Services Vision
  • 10. Understand Your Mission
  • 11.
    • Purpose
    • Reason for company existence
    • Strategy
    • Way of doing things [behavior & standards]
    • Values
    Mission
  • 12. Understand Your Company Culture
  • 13.
    • Conservative
    • Liberal
    • Profit-oriented
    • Customer-centric
    • Sales & Marketing-oriented
    Culture
  • 14. Construct Your Policies & Procedures
  • 15.
    • Reflect the mission & vision
    • Reflect the culture
    • Encode your standards & behaviors
    • Reflect your values
    • All encompassing of your functions
      • New customer policy
      • Credit investigation policy
      • Credit analysis policy
      • Authority level policy
      • Credit limit policy
    Policies & Procedures Credit & Collection
  • 16.
    • All encompassing of your functions (Continued)
      • Credit terms policy
      • Credit hold Policy
      • Periodic credit review policy
      • Collection policy
      • Cash application policy
      • Dispute resolution policy
      • Third party referral policy
      • Bad debt and write-off policy
      • Record keeping & disclosure policy
    Policies & Procedures Credit & Collection
  • 17. Chart the Process
  • 18.
    • Set-up sheet
    • Credit application
    • Credit reports
    • Trade References
    • Bank references
    • Financial statements
      • Credit scoring
      • Financial ratios analysis
      • Z score
    • Salesman’s Comments
    Chart the process For new accounts
  • 19.
    • Security instruments
      • L/C
      • Standby L/C
      • Guarantees
      • Promissory notes
      • Security agreements & UCC filing
      • Liens
    • Credit insurance
    • Trade financing alternatives
    Chart the process For new accounts (Continued)
  • 20.
    • Call, e-mail, send letters & back up
    • Involve your sales force
    • Initiate payment plans
    • Involve your in-house legal department
    • Refer to collection
    • Refer to outside legal
    • Put an account on bad debt list
    • Write-off
    Chart the process For collection & write-off
  • 21. Know the legal & Regulatory Environment
  • 22.
    • Fair Credit Reporting Act
    • Fair Debt Collection Practices Act
    • Truth-in-Lending Act
    • Equal Credit Opportunity Act (ECOA)
    • Anti-trust Regulations
      • Sherman Act 1890
      • Clayton Act 1914
      • Robinson-Patman Act 1936
      • FTC Act 1914
    Know the legal Environment
  • 23.
    • Bankruptcy Act (BAPCPA)
    • Money Laundering Act
    • The Patriot Act
    • Sarbanes-Oxley
    • Export Administration Regulations (EAR)
    • Customs regulations
    • SEC regulations
    • GAAP & IAS
    Know the legal Environment
  • 24. Master the Cs
  • 25. Master the Matrix Know Your Customer---Character Choose The Path Willing Unable Able Unwilling
  • 26. Master the Matrix Know Thy Customer---Character Choose The Path Willing Unable Able Unwilling
  • 27. Master the Matrix [Sales focus] Classify your Customer---Character Willing Unable Able Pursue!!! Unwilling Find Deal Enhancers & Enablers Work on Desire and Willingness Abandon The Prospect!!!
  • 28. Master the Matrix [Credit focus] Classify your Customer---Character Willing Unable Able Approve!!! Unwilling Think Outside The Box Seek Alternatives Work the Deal Protect Your Transaction Reject This Applicant!!!
  • 29. Master the Matrix [Collection Focus] Classify your Customer---Character Willing Unable Able Great!!! Unwilling Work With Your Customer Pursue Vigorously Third Party Involvement Write-Off Cancel Don’t Waste your time
  • 30. Master the 18 basic Cs Of Domestic Credit
  • 31.
    • 1. Character
    2. Capacity 3. Capital
  • 32. 4. Collateral -- guarantees 5. Conditions -- business economic, political industry
  • 33. 6. Computers -- technological state 7. Common Sense 8. Credit Insurance
  • 34. 9. Communication
      • The interpersonal Cs
    10. Cooperation 12. Courtesy 11. Collaboration
  • 35. 13. Carelessness
      • The Negative Cs
    14. Complacency 15. Competition
  • 36. 16. Concern
      • The Positive Cs
    17. Compassion 18. Care
  • 37. 2. Currency Control -FX Risk 1. Country Risk 3. Cultural Differences
      • The International Cs
  • 38.
    • C -- CREATIVITY
    • I -- INNOVATION
    • S -- SPEED
    • A -- AGILITY
    • A --ACCURACY
    • C --COURTESY
  • 39.
    • Flexibility and willingness to change
    • Open-mindedness
    • Negotiating skills
    • Honesty and integrity
    • Leadership
    • Dedication, dependability and reliability
    • Love of learning ( continuous education)
    The Mark of True Credit Professionals
  • 40. “ We make a living by what we get, we make a life by what we give .” Sir Winston Churchill
  • 41. ERS Consulting Services Eddy Sumar, MBA, CCE, CICE, CEW 7841 Leucite Avenue Rancho Cucamonga, CA. 91730 909-481-9869 [email_address] Thank You!