Credit Management Handbook ~ 5th Edition

Contents......Page 6
List of figures......Page 12
Notes on contributors......Page 14
Foreword......Page 16
Introduction......Page 18
PART I: THE CREDIT MANAGEMENT FUNCTION......Page 22
Origins......Page 24
The role of credit and its importance in the economy......Page 27
The development of consumer and export credit......Page 28
Secured and unsecured credit......Page 31
Information technology......Page 32
External services......Page 34
Credit management as a profession......Page 35
Coping with change and the path forward......Page 37
The cost of credit......Page 40
The effect of credit on profits......Page 42
The effect of credit on liquidity......Page 44
The financing of credit......Page 45
Cash flow......Page 46
Measurement of debtors......Page 48
Cash targets......Page 50
Planning and budgeting debtors......Page 54
Summary......Page 55
A credit policy......Page 57
The key features of a credit policy......Page 61
Credit risk policy......Page 67
Credit policy for export sales......Page 68
The functions of a credit department......Page 71
The role of the credit manager......Page 72
Reporting structure and organization......Page 74
The qualities of the credit manager......Page 77
Credit staff and their training......Page 79
PART II: CREDIT TERMS AND CONDITIONS OF SALE......Page 82
Credit terms......Page 84
The factors affecting credit terms......Page 85
Conditions of sale......Page 86
Types of credit terms......Page 87
Cash discounts......Page 89
Late payment interest......Page 90
Progress payments, retentions and consignment accounts......Page 91
Methods of payment......Page 93
PART III: ASSESSING CREDIT RISK......Page 100
Credit assessment overview......Page 102
Marketing and risk assessment......Page 106
Customer identity – types of customer......Page 110
Trade credit information and its sources......Page 113
Financial statements......Page 120
Interpretation of accounts......Page 125
Summary......Page 140
Why have credit ratings?......Page 142
Calculating credit ratings......Page 143
Risk categories......Page 145
Identifying and dealing with high-risk accounts......Page 151
Bad debt reserves......Page 154
Effective credit management......Page 156
Background......Page 161
Developing and using a solvency model......Page 162
Credit management applications......Page 165
Background......Page 167
Attitude......Page 169
The three phases of failure......Page 174
Can it be avoided?......Page 177
Conclusion......Page 178
PART IV: SALES LEDGER......Page 180
Administration and format......Page 182
Statements......Page 185
Disputes and queries......Page 186
Cash matching......Page 189
Collection aids......Page 191
Controls......Page 193
System requirements......Page 196
The sales ledger and customer file......Page 198
PART V: CASH COLLECTION......Page 208
The front end......Page 210
Collection attitudes......Page 214
Days sales outstanding (DSO) and cash targets......Page 216
Incentives......Page 219
Computer aids to collection......Page 220
Methods......Page 222
The future......Page 242
The telephone......Page 247
Staff......Page 248
Making the call......Page 252
Customer excuses......Page 257
Win-win......Page 264
Conclusion......Page 266
The collection agency......Page 267
The right agency?......Page 268
Choosing the agency......Page 269
The CSA......Page 270
The need to plan debtors and then to report the results......Page 272
The powerful tool – the DSO ratio......Page 273
Measurable items......Page 274
PART VI: CREDIT INSURANCE......Page 296
Introduction......Page 298
Features of credit insurance policies......Page 299
When does cover commence?......Page 300
Benefits of credit insurance......Page 307
Importance of brokers......Page 311
Captives and mutuals......Page 312
Further reading......Page 313
Useful addresses......Page 314
Introduction......Page 316
Country (political) risks......Page 317
Pre-shipment cover: suitable for companies making specialist goods to order and not easily resold elsewhere......Page 318
Credit insurance compared to confirmed letters of credit......Page 319
Sources of export cover......Page 320
The UK's government-supported export credit agency – ECGD – and medium-term credit......Page 323
Useful addresses......Page 324
PART VII: EXPORT CREDIT AND FINANCE......Page 326
Exporting is expensive – so manage the expense!......Page 328
Time and cost in export payments......Page 329
Effective conditions of sale......Page 330
Agents, distributors and subsidiaries......Page 333
Export documents......Page 334
Payment terms......Page 340
Countertrade......Page 344
Getting funds transferred from abroad......Page 345
Information on country (political) risks......Page 348
Information on customer risks......Page 350
Evaluating customer risks......Page 352
Codifying information......Page 353
Collecting overdues – an overview......Page 355
A systematic approach......Page 356
A word about foreign currency......Page 357
The future for export collections......Page 358
Think international......Page 360
The need for special money for exports......Page 362
Bill advances and negotiation......Page 363
Finance from letters of credit......Page 366
ECGD-backed finance: medium-term credit......Page 367
The international consensus......Page 369
The credit manager and foreign currency......Page 371
The history of foreign exchange......Page 372
Present day foreign exchange markets......Page 373
Dealing operations......Page 376
Press charts of foreign currency rates......Page 379
Exchange risks and how to cover them......Page 380
The European Monetary System and ECU, leading to the Euro......Page 382
The UK and the Euro......Page 383
Glossary of foreign exchange terms......Page 384
PART VIII: CONSUMER CREDIT......Page 388
Securing finance for the credit operation......Page 390
Relationship with finance houses......Page 392
Types of credit available......Page 393
Credit policy......Page 398
Controlling the risk......Page 402
Collecting accounts......Page 403
Collection letters by computer......Page 407
Management information and reports......Page 411
Introduction......Page 417
Development of consumer credit law......Page 418
The Consumer Credit Act......Page 419
The Data Protection Act 1998......Page 429
Other laws......Page 433
Conclusion and further reading......Page 436
PART IX: COMMERCIAL CREDIT LAW......Page 438
Pre-action steps......Page 440
Issuing the claim form......Page 443
Completing the form......Page 444
Service of the claim form......Page 448
The next stage......Page 451
Defended actions......Page 452
Enforcement......Page 459
Introduction......Page 470
Personal insolvency......Page 471
Partnerships......Page 476
Corporate insolvency......Page 477
Creditors' voluntary liquidation......Page 481
Members' voluntary liquidation......Page 484
Receivership......Page 485
Company voluntary arrangement......Page 486
Administration order......Page 487
Informal schemes......Page 489
PART X: CREDIT SERVICES......Page 490
How does invoice financing work?......Page 492
How does factoring work?......Page 493
Points to be aware of when considering invoice financing......Page 494
Choosing a factor......Page 495
Introduction......Page 496
What are credit cards?......Page 497
Early development in the USA......Page 499
UK market development......Page 500
Credit and debit card spending and borrowing......Page 502
The cost of payments......Page 507
The cost of promoting cards......Page 508
Fraud and bad debt......Page 509
Chips and electronic purse......Page 510
Introduction to sales finance......Page 513
Benefits of sales finance to buyer and seller......Page 516
Types of sales finance......Page 518
Which product is best for what?......Page 531
Summary......Page 532
Further reading......Page 533
Membership organizations for credit management personnel......Page 536
Training and consultancy services for credit management......Page 540
Sources of credit information......Page 546
Useful addresses......Page 551
Useful credit publications......Page 554
Query management systems......Page 557
The better payment practice group......Page 558
Suggested contents for a credit manual......Page 560
A......Page 562
B......Page 563
C......Page 564
D......Page 570
E......Page 572
F......Page 573
I......Page 574
L......Page 575
O......Page 576
P......Page 577
R......Page 578
S......Page 579
T......Page 580
U......Page 581
Z......Page 582