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- Bankruptcy and Bankruptcy Code
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- Legal
- Risk Analysis
- Understanding Accounts Receivable Costs
- Accounts Receivable Forecasting
- Informing Customers of their Credit Limits
- Authorization for Bank to Release Credit Information
- Authorizing Release of Credit Information
- Bank Loans and Bank Credit
- Expediting Bank Reference Requests
- Understanding Banking Relationships
- Bounced Checks; Collecting on Bounced Checks, NSF Checks
- Business Credit; Trade Credit; Open Account Credit Terms
- The Five Cs of Credit Analysis
- Check Acceptance
- Check Kiting
- Classification of Risk; Customer Risk Score
- COD Terms; Slow Pay; High Risk; Risk Mitigation;
- Code of Ethics
- Confidentiality Agreement
- Consumer Credit Granting
- Commercial Credit Application; Necessary Components
- Credit Approval Process
- Credit Associations
- Credit Decision-Making
- Offering Open Account Terms; Credit Extension
- Customer Credit File; Credit File
- Credit Granting Authority
- Credit History and Strategy
- Credit Insurance; Trade Credit Insurance; Export Credit Insurance
- Credit Line or Credit Limit
- Credit Policy Checklist
- Credit References
- Credit Reporting Agencies
- Credit Risk Environment
- Credit Risk Management
- Credit Role/Strategy
- Credit Decision Making: Is it Art or Science?
- Customer Purchase Orders, Errors on POs and their Impact on Collections
- Customer Retention
- Grace Periods and Cash Discounts
- Direct and Indirect Credit Investigations
- Unearned Discounts; Unearned Cash Discounts; Cash Discounts
- Enterprise Resource Planning
- Ethics for the Credit Manager
- Evaluating Financial Health
- Exchange of Credit Information
- Extended Dating Terms
- Credit File Documentation
- Fraud Signs and Prevention
- History of Credit
- Cargo Insurance
- Insurance Brokers and Credit Insurance
- Internet as a Source of Credit Information
- Late Charges
- Minimum First Order Without Credit Investigation
- New Account Checklist
- Non-Disclosure Agreement
- Open Account Sales; Open Account Terms; Extension of Credit on Open Account Terms
- Order Approval; Order Hold; Credit Reviews; Pending Order Review
- Order Controls / Order Approval
- Pro Forma Invoices
- Requesting Financial Information from Customers
- Restrictive Endorsements
- Returned Checks
- Return Merchandise Authorizations
- Root Cause Analysis of Past Due Balances
- Safeguarding Accounts
- Security Agreements; Secured Debts
- Seller's Invoice
- Terms and Conditions
- Terms of Sale
- Terms of Sale: Examples
- Types of Credit: Consumer Credit; Bank Credit; Commercial Credit; B2B; Business to Business
- Written Credit Policy Manual
- Handling Post Audit Claims More Effectively; Post Audit Claims
- Do's and Don'ts of Business to Business Debt Collection, Debt Collection Practices
- Bad Debt Reserves
- Advantages and Disadvantages of Purchasing Credit Insurance
- A Letter of Introduction
- Addressing Chronic Slow Pay Customers
- More about Cash Forecasting
- Streamlining Order Processing
- Collection Practices
- Financial Analysis
- Financing Methods
- International Credit
- Laws and Regulations
- Payment Methods
- Performance Measures
- Security Instruments
- Career Management, and Job Change
- Credit Website Tools
- Upcoming Educational Events
- Credit and Collections Tools and Tips
- Tips on Creating Better Emails
- Generating Effective Credit Correspondence
- Exporting
- Accounting
Credit Risk Environment
To establish an appropriate credit-risk environment, the company President or the CFO should periodically review the company's credit-risk strategy and credit policies to confirm that they reflect the company's tolerance for credit risk, and will support the level of sales and cash flow that the company needs.
The credit manager is responsible for implementing the credit-risk strategy approved or established by senior management. In addition, credit professionals remain responsible for developing and implementing policies or procedures for identifying risk, as well as for measuring, monitoring, and controlling risk. Credit granting authority and credit granting criteria should be carefully documented and thoroughly understood by everyone with authority to extend credit or release orders.
Credit professionals should have a written process for approving new accounts, as well as for periodically re-valuating existing customers. In addition, creditors should update the entire active account portfolio at least once a year. You should also evaluate customers on the basis of their degree of credit risk and assign scores or ratings accordingly. Customers identified as high risk should be subject to more stringent follow-up if and when the account becomes delinquent.
© 2011. Michael C. Dennis. All Rights Reserved.