Credit, Cash, and Collections Management

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Provides information on credit analysis, financial statements analysis, legal aspects of credit, and collection techniques.

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Credit, Cash, and Collections Management

  1. 1. CREDIT, CASH & COLLECTIONS MANAGEMENT
  2. 2. Author/Lecturer <ul><li>DAVID L. OSBURN </li></ul><ul><li>David is the founder and managing member of David L. Osburn & Associates LLC, a Las Vegas-based business training and contract CFO firm that provides seminar/keynote speeches for various groups including CPAs, bankers, attorneys, credit union employees, credit managers, trade groups, and businessowners. He also serves as a contract CFO for a large multi-state construction company, co-manages a bank educational program with the University of Nevada Las Vegas, and is a board member of North Star Business Services, a commercial lending company (commercial real estate and equipment financing). </li></ul><ul><li>His extensive professional background encompasses over 25 years in banking, finance, and marketing. His bank commercial lending credentials include comprehensive loan underwriting, management, customer development, and loan workout experience. </li></ul><ul><li>In addition, David is an Adjunct Professor for Regis University, an accredited MBA program and the College of Southern Nevada, a community college. He has taught college courses for over 24 years, covering Finance, Accounting, Economics, Marketing, Banking, Business Law, and Management. </li></ul><ul><li>He earned an MBA in Finance/Marketing from Utah State University and a BS in Finance from Brigham Young University. He is also a graduate of the University of Oklahoma National Commercial Lending School. </li></ul><ul><li>David L. Osburn & Associates, LLC </li></ul><ul><li>A Business Training & Contract CFO Firm </li></ul><ul><li>David L. Osburn, MBA </li></ul><ul><li>Managing Member </li></ul><ul><li>7521 Enchanted Hills Ct. </li></ul><ul><li>Las Vegas, Nevada 89129 </li></ul><ul><li>Direct: (702) 655-1187 </li></ul><ul><li>Fax: (702) 382-2298 </li></ul><ul><li>E-Mail: [email_address] </li></ul><ul><li>Web: dlosburn.com </li></ul>
  3. 3. <ul><li>Credit, Cash & Collections Management </li></ul><ul><li>I. CREDIT ANALYSIS </li></ul><ul><li>II. FINANCIAL STATEMENT ANALYSIS </li></ul><ul><li>III. LEGAL ASPECTS OF CREDIT </li></ul><ul><li>IV. COLLECTION TECHNIQUES </li></ul>
  4. 4. <ul><ul><ul><li>I. CREDIT ANALYSIS </li></ul></ul></ul><ul><ul><ul><li>A. THE BASICS: WHAT IS CREDIT? </li></ul></ul></ul><ul><ul><ul><li>EX. BUSINESS: BANK LOAN, TRADE CREDIT, BOND, </li></ul></ul></ul><ul><ul><ul><li>COMMERCIAL PAPER </li></ul></ul></ul><ul><ul><ul><li>EX. PERSONAL: AUTO LOAN, CO-SIGNED LOAN </li></ul></ul></ul><ul><ul><ul><li>B. HOW DOES A COMPANY REALLY OBTAIN </li></ul></ul></ul><ul><ul><ul><li>CREDIT? </li></ul></ul></ul><ul><ul><ul><li>C. TRADITIONAL TRADE CREDIT </li></ul></ul></ul>
  5. 5. D. IF YOU GRANT TERMS, ARE YOU A LENDER? E. IF YOU ARE A LENDER, ARE YOU ALSO AN UNDERWRITER? F. THE FIVE “Cs” OF CREDIT: 1. Capital: 2. Capacity: 3. Conditions: 4. Collateral: 5. Character:
  6. 6. <ul><li>II. FINANCIAL STATEMENT ANALYSIS </li></ul><ul><li> A. LIQUIDITY: </li></ul><ul><li> WORKING CAPITAL: CURRENT ASSETS- CURRENT LIABILITIES </li></ul><ul><li> CURRENT RATIO: CURRENT ASSETS/CURRENT LIABILITIES </li></ul><ul><li> QUICK/ACID TEST RATIO: CURRENT ASSETS- </li></ul><ul><li> INVENTORY/CURRENT LIABILITIES </li></ul><ul><li> B. ACTIVITY: </li></ul><ul><li> ACCOUNTS RECEIVABLE TURNOVER: A/R/SALES X DAYS IN PERIOD </li></ul><ul><li> C. CASH FLOW ANALYSIS: </li></ul><ul><li> TRADITIONAL (ACCRUAL BASIS) VERSUS CASH BASIS </li></ul>
  7. 7. <ul><li>TRADITIONAL CASH FLOW </li></ul><ul><li>EBITDA $1,200M </li></ul><ul><li>LESS: DEBT SER (P&I) 500M </li></ul><ul><li>MARGIN $700M </li></ul><ul><li>DCR 2.4X </li></ul>
  8. 8. <ul><li>CASH BASIS CASH FLOW </li></ul><ul><li>NCAO $800M </li></ul><ul><li>LESS: </li></ul><ul><li> MANDATORY $100M </li></ul><ul><li> CAPITAL EXP. </li></ul><ul><li> DIVIDENDS 350M </li></ul><ul><li> DEBT SER (P & I) 300M </li></ul><ul><li>MARGIN $ 50M </li></ul><ul><li>DCR 1.07X </li></ul>
  9. 9. <ul><li>III. LEGAL ASPECTS OF CREDIT </li></ul><ul><li> A. WHAT IS A CONTRACT: OFFER, ACCEPTANCE, MUTUAL </li></ul><ul><li> ASSENT, CAPACITY, CONSIDERATION, LEGALITY </li></ul><ul><li> B. WHAT ABOUT GUARANTEES: </li></ul><ul><li> 1. MUST BE IN WRITING </li></ul><ul><li> 2. CAN BE SECURED, UNSECURED, GENERAL OR </li></ul><ul><li>LIMITED, TIME LIMITED OR CONTINUING </li></ul><ul><li> C. WHAT ABOUT COLLATERAL? </li></ul><ul><li> TAKING A SECURITY INTEREST IN THE ASSET </li></ul>
  10. 10. <ul><li>IV. COLLECTION TECHNIQUES </li></ul><ul><li> A. TELEPHONE </li></ul><ul><li> B. FAIR DEBT COLLECTION PRACTICES ACT </li></ul><ul><li> 1. POSTCARD </li></ul><ul><li> 2. REPRESENTED BY AN ATTORNEY </li></ul><ul><li> 3. TIME: 8AM-9PM </li></ul><ul><li> 4. PLACE OF EMPLOYMENT </li></ul><ul><li>5. NOT COMMUNICATE WITH OTHER PARTIES </li></ul><ul><li> 6. REFUSES TO PAY, CEASE TO COMMUNICATE </li></ul><ul><li> 7. NO HARASSMENT </li></ul>
  11. 11. FINAL THOUGHT <ul><li>Cash is not king, cash flow is king! </li></ul>

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