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- Credit Role/Strategy
- Credit Decision Making: Is it Art or Science?
- Customer Purchase Orders, Errors on POs and their Impact on Collections
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- Unearned Discounts; Unearned Cash Discounts; Cash Discounts
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- Evaluating Financial Health
- Exchange of Credit Information
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- 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
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- Root Cause Analysis of Past Due Balances
- Safeguarding Accounts
- Security Agreements; Secured Debts
- Seller's Invoice
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- 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
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- Generating Effective Credit Correspondence
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Credit Role/Strategy
The credit department is involved in the quote to cash process, meaning the process from order approval to the cash collection. The cycle involves the important task of information collection, credit analysis, collections and cash application, and deduction resolution. All of these elements have both financial and strategic implications in the business process.
Collection of Information
The collection of information enhances the quality of financial analysis. That same information also has strategic implications; it can strengthen a company's understanding of its customer base and lead to expanding that base. The credit department is, in effect, an information warehouse within any company. The information collected by a credit department can be used by a purchasing department to screen vendors or by the marketing department to help find new customers.
Credit Analysis
Credit analysis provides financial protection by determining whether the customer has the ability to pay the debt. Depending on a company's strategic goals, becomes an important factor in the sales decision.
Collection
While the credit department is responsible for the enforcement of payment terms, credit terms are a part of a company's strategic business plan. Whether credit terms are restrictive or liberal will have a direct impact on a company's strategic business plan as well as on the credit process. Cash forecasting is a natural transition for the credit department.
Cash Application
The financial impact of cash application is related to the timing of cash flow and the cost of carrying a receivable. The strategic implication of cost of carrying receivables is related to a company's financial strength and its need for cash flow.
Deduction Resolution
The financial implication of the cost of carrying unresolved deductions or customer disputes impacts a company's operating costs. Deduction resolution has very critical strategic implications because it is directly related to customer satisfaction, which in turn, impacts sales.
Edited by Michael C. Dennis, author of "1001 Collection Tools and Tips."