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Credit Policy and Procedures

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Topics include components of a credit policy, steps used in establishing a credit policy, how a credit policy is implemented, types of credit policies, components of a credit manual, etc.

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Credit Policy and Procedures

  1. 1. Credit Policy and Procedures Chapter Five NACM
  2. 2. Learning Objectives <ul><li>Components of a credit policy </li></ul><ul><li>Steps used in establishing a credit policy </li></ul><ul><li>How a credit policy is implemented </li></ul><ul><li>Types of credit policies </li></ul><ul><li>Components of a credit manual </li></ul><ul><li>Create a credit application </li></ul><ul><li>Trade laws </li></ul>
  3. 3. Credit Policy and Procedures <ul><li>Defining Credit Policy </li></ul><ul><li>Establishing Credit Policy </li></ul><ul><li>Implementing Credit Policy </li></ul><ul><li>Types of Credit Policy </li></ul><ul><li>Credit Procedures Manual </li></ul><ul><li>Credit Applications </li></ul>
  4. 4. Defining Credit Policy <ul><li>Importance of Credit Policy </li></ul><ul><li>Objectives of a Credit Department </li></ul><ul><li>Policy and Procedures </li></ul><ul><li>Policy and Practice </li></ul><ul><li>Handling Exception </li></ul>
  5. 5. Establishing Credit Policy <ul><li>General Considerations </li></ul><ul><li>Credit Policy Focal Points </li></ul><ul><li>Other Influences on Credit Policy </li></ul><ul><li>Formulating the Policy </li></ul><ul><li>Reasons for a Written Policy </li></ul><ul><li>Checklist for a Well Defined Credit Policy </li></ul><ul><li>Example of a Credit Policy </li></ul>
  6. 6. Implementing Credit Policy <ul><li>Communication of Policy </li></ul><ul><li>Assignment of Responsibility </li></ul><ul><li>Establishing Procedures </li></ul><ul><li>Applying Under Varying Conditions </li></ul><ul><li>Factors Influencing Short-Term Policy Application </li></ul><ul><li>Conditions that Can Cause Credit Policy to Change </li></ul><ul><li>Review of Credit Policy </li></ul>
  7. 7. Types of Credit Policy <ul><li>Analysis of Risk </li></ul><ul><li>Risk Criteria </li></ul><ul><li>Degree of Collection Effort </li></ul>
  8. 8. Credit Procedures Manual <ul><li>Importance </li></ul><ul><li>Format </li></ul><ul><li>Maintenance – must be kept current </li></ul><ul><li>Recommended Contents </li></ul>
  9. 9. Credit Procedures Manual Recommended Contents <ul><li>Table of Contents </li></ul><ul><li>Investigation </li></ul><ul><li>Security Devices </li></ul><ul><li>Credit Approval and Administration </li></ul><ul><li>Collections </li></ul><ul><li>Reports </li></ul>
  10. 10. Credit Application <ul><li>Purpose of a Credit Application </li></ul><ul><li>Credit Application as a Source of Information </li></ul><ul><li>Credit Application as a Contract </li></ul><ul><li>Below the Signature Line </li></ul><ul><li>Supplemental Information </li></ul>
  11. 11. Terms and Conditions of Sale Chapter Six NACM
  12. 12. Learning Objectives <ul><li>The role played by terms in day-to-day business transactions </li></ul><ul><li>Major factors that influence terms </li></ul><ul><li>Key elements of terms </li></ul><ul><li>Types of terms and how they differ </li></ul><ul><li>Impacts of payment timing and discounts on profitability </li></ul>
  13. 13. Terms and Conditions of Sale <ul><li>Important Considerations </li></ul><ul><li>Influencing Factors </li></ul><ul><li>Categories of Terms of Sale </li></ul><ul><li>Special Terms </li></ul><ul><li>Export Terms </li></ul>
  14. 14. Important Considerations <ul><li>Applying Credit Policy to Terms </li></ul><ul><li>Contractual Considerations </li></ul><ul><li>Antitrust Implications </li></ul>
  15. 15. Influencing Factors <ul><li>General Considerations </li></ul><ul><li>Competition </li></ul><ul><li>Market and Product Characteristics </li></ul><ul><li>Type of Customer </li></ul><ul><li>Profitability </li></ul>
  16. 16. Categories of Terms of Payment <ul><li>Cash/Prepayment Terms </li></ul><ul><li>“ Short” Terms </li></ul><ul><li>Open Account Terms </li></ul><ul><li>Discount Terms </li></ul><ul><li>Analyzing the Cost of Offering Cash Discounts </li></ul><ul><li>Late Charges </li></ul>
  17. 17. Special Terms <ul><li>Receipt of Goods </li></ul><ul><li>Bill and Hold </li></ul><ul><li>Consignment </li></ul><ul><li>Floor-Plan Financing </li></ul><ul><li>Contra Account </li></ul>
  18. 18. Special Terms (continued) <ul><li>Extra Dating </li></ul><ul><li>Seasonal Dating </li></ul><ul><li>Security Interest </li></ul><ul><li>Advances </li></ul><ul><li>Progress Payments </li></ul>
  19. 19. Export Terms <ul><li>Pro Forma Invoice </li></ul><ul><li>Barter Arrangements </li></ul><ul><li>Incoterms </li></ul>
  20. 20. End of Session 3

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