This Power Point is talking about The Credit Process as guide for Small Business Owners containing =Methodology =Major deliverables =5 C’s of Credit =Credit Risk Management =Management Approvals =Future work processes =Future Procedures Overview =Information system support =Functions of Credit Control Group & Marketing Division =Way forward

1. Business Risk Services
Credit Process
Enhancement Review
A presentation to marketing and finance departments on the future
state vision of the credit control processes
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2. Business Risk Services
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Contents
 Background
 Methodology
 Major deliverables
 Future work processes
 Future Procedures Overview
 Information system support
 Functions of Credit Control Group & Marketing Division
 Way forward

3. Business Risk Services
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Background
•Lack of formal credit policies and procedures
•Limited information to support monitoring and decision making
•Steady cash flows and working capital desired for self financing
•Deteriorating receivables ratios
2003 2002 2001
BHDm BHDm BHDm
Trade receivables 114 88 72
Receivables as % of revenue 10.9% 9.9% 8.8%

4. Business Risk Services
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Overdue Debtors
Jan 2004
Dec 2004
100
80
60
40
20
0
BD m
1-30 Days 30-60 Days 60+ Days
Past due
Avg Overdue 65.9 2.55 54.65
Cost of capital at cost of financing of BAPCO = 5m

5. Business Risk Services
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Understand and assess current credit
policies and procedures.
Study and accumulate material on
best practice.
Compare best practice with current
practices.
Identify opportunities for improvements.
Standardize credit and collection
procedures in a corporate-wide strategy In process

6. Business Risk Services
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Management reports and oversight
Management approvals
Ongoing credit risk management
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Comprehensive
credit policy that
addresses
Credit risk management
Streamlined collections
Credit control
manual
Consistent corporate-wide procedures
System based applications and standard forms
Staff training

7. Business Risk Services
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5 C’s of Credit
Character
Capital
Capacity
Credit Control
Conditions Collateral

8. Business Risk Services
MARKETING DEPARTMENT CREDIT DEPARTMENT
Evaluate and recommend
credit limit
Enter customer record
and credit limit
Review customer data
on an ongoing basis
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INFORMATION
SYSTEM
Credit application
Approve customer and
credit limit
Notification is sent to
customer
Re-evaluate and
recommend
credit limits
Approve revised credit
limits
Alerts/Exceptions
reported Reminder letters
generated and sent
to customers
Take appropriate
action
Online
customer
payment
history
and terms
Start

9. Business Risk Services
Credit Risk Management
• Consistent assessment of the credit risk of prospective
customers
• Formal credit checks to be applied to all customers
• Guidelines established for the periodic re-evaluation of
credit worthiness and credit limits of existing customers
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10. Business Risk Services
Management Approvals
Approval matrices set for the following areas:
• Credit limit authorization
• Reevaluation of credit limits
• Major customer visit schedule
• Assigning accounts for initiation of legal
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proceedings
• Write off of bad debts

11. Business Risk Services
Ongoing Credit Risk Management
• Periodic reevaluation of credit limits and credit
worthiness of customers
• Credit-alert notification sent automatically by
credit rating agency to the Credit Department for
customers experiencing financial difficulty or
announcing financial results
• Credit alerts generated by the system for
customers who have exceeded their credit limits
and/or have overdue invoices
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12. Business Risk Services
Ongoing Credit Risk Management (contd)
• Credit Control Group will receive a list of customers
that are scheduled for follow-up each day
• Customer information will be consolidated on one
screen
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13. Business Risk Services
Management Oversight and Monitoring
• Periodic management reports that identify
potential credit risks, trends and changes in
credit worthiness
• Performance metrics for measuring the
effectiveness of collection efforts
• Internal surveys to periodically evaluate Credit
and A/R operations
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14. Functions of credit control Business Risk Services
committee
• Monitor effectiveness and application of credit control
procedures.
• Review and recommend actions for exceptions identified
by credit control group.
• Recommend cases of delinquent accounts for legal action.
• Recommend provision for bad debts.
• Update the board on their activities and important matters
concerning credit management.
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15. Business Risk Services
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Information system support
Approval of
customers
& credit limits
Exception
reports
Sales orders
delivery notes
Auto flagging
of overdue
invoices &
exceeded
credit
A/R
Online
customer
payment
history
MIS

16. Business Risk Services
Credit control group Marketing division
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Credit control
group
Order
processing
Approve
credit
limits
Accept
customers
Marketing
division

17. Business Risk Services
WAY FORWARD
• Finalization of draft credit control manual
• Submission of credit control manual for
comments to stakeholders
• TSRS to review credit control manual for
information systems solution
• Final draft credit control manual issued
• IT solution implemented
• Staff trained to operate the new system
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