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The Art of Credit Management

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Information about The Art of Credit Management

Published on October 22, 2007

Author: anscers

Source: slideshare.net

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WRCC The Art of Credit Management
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ER$ Consulting Services In Collaboration with CMA Presents The Art of Credit Management October 19, 2007 Las Vegas

By Eddy A. Sumar, MBA, CCE, CICE A Fundamental Checklist for the Success of Every Credit Professional Construct Your Checklist! Gather The Ingredients!

"It is not the mountain we conquer, but ourselves." - Sir Edmund Hillary

"It is not the mountain we conquer, but ourselves."

Define Credit

Credit comes from the Latin word “credere,” which means trust. It is a mutual trust between the grantor and recipient of the credit. It involves a great deal of trust and confidence in the ability , willingness and character of a “debtor” to deliver on its promises to the “creditor,” according to agreed upon terms. Credit also implies a reciprocal trust that the creditor will deliver what was contracted or agreed upon. Thus, credit is “a cooperative function between seller and buyer or between creditor and debtor.

Credit Redefined A Sales Tool A Marketing Tool Financial Vehicle Strategic Alliance

Credit Redefined

A Sales Tool

A Marketing Tool

Financial Vehicle

Strategic Alliance

“ Before you can score, you must first have a goal” “ A Fundamental Checklist” -- Anonymous

“ Before you can score, you must first have a goal”

Know Your Vision Your Goals

Company Vision--Goals Your Dept Vision--Goals Credit and Sales—One Team Credit is a Sales & Marketing Tool Credit Department becomes a Center for Client Services Vision

Understand Your Mission

Purpose Reason for company existence Strategy Way of doing things [behavior & standards] Values Mission

Purpose

Reason for company existence

Strategy

Way of doing things [behavior & standards]

Values

Understand Your Company Culture

Conservative Liberal Profit-oriented Customer-centric Sales & Marketing-oriented Culture

Conservative

Liberal

Profit-oriented

Customer-centric

Sales & Marketing-oriented

Construct Your Policies & Procedures

Reflect the mission & vision Reflect the culture Encode your standards & behaviors Reflect your values All encompassing of your functions New customer policy Credit investigation policy Credit analysis policy Authority level policy Credit limit policy Policies & Procedures Credit & Collection

Reflect the mission & vision

Reflect the culture

Encode your standards & behaviors

Reflect your values

All encompassing of your functions

New customer policy

Credit investigation policy

Credit analysis policy

Authority level policy

Credit limit policy

All encompassing of your functions (Continued) Credit terms policy Credit hold Policy Periodic credit review policy Collection policy Cash application policy Dispute resolution policy Third party referral policy Bad debt and write-off policy Record keeping & disclosure policy Policies & Procedures Credit & Collection

All encompassing of your functions (Continued)

Credit terms policy

Credit hold Policy

Periodic credit review policy

Collection policy

Cash application policy

Dispute resolution policy

Third party referral policy

Bad debt and write-off policy

Record keeping & disclosure policy

Chart the Process

Set-up sheet Credit application Credit reports Trade References Bank references Financial statements Credit scoring Financial ratios analysis Z score Salesman’s Comments Chart the process For new accounts

Set-up sheet

Credit application

Credit reports

Trade References

Bank references

Financial statements

Credit scoring

Financial ratios analysis

Z score

Salesman’s Comments

Security instruments L/C Standby L/C Guarantees Promissory notes Security agreements & UCC filing Liens Credit insurance Trade financing alternatives Chart the process For new accounts (Continued)

Security instruments

L/C

Standby L/C

Guarantees

Promissory notes

Security agreements & UCC filing

Liens

Credit insurance

Trade financing alternatives

Call, e-mail, send letters & back up Involve your sales force Initiate payment plans Involve your in-house legal department Refer to collection Refer to outside legal Put an account on bad debt list Write-off Chart the process For collection & write-off

Call, e-mail, send letters & back up

Involve your sales force

Initiate payment plans

Involve your in-house legal department

Refer to collection

Refer to outside legal

Put an account on bad debt list

Write-off

Know the legal & Regulatory Environment

Fair Credit Reporting Act Fair Debt Collection Practices Act Truth-in-Lending Act Equal Credit Opportunity Act (ECOA) Anti-trust Regulations Sherman Act 1890 Clayton Act 1914 Robinson-Patman Act 1936 FTC Act 1914 Know the legal Environment

Fair Credit Reporting Act

Fair Debt Collection Practices Act

Truth-in-Lending Act

Equal Credit Opportunity Act (ECOA)

Anti-trust Regulations

Sherman Act 1890

Clayton Act 1914

Robinson-Patman Act 1936

FTC Act 1914

Bankruptcy Act (BAPCPA) Money Laundering Act The Patriot Act Sarbanes-Oxley Export Administration Regulations (EAR) Customs regulations SEC regulations GAAP & IAS Know the legal Environment

Bankruptcy Act (BAPCPA)

Money Laundering Act

The Patriot Act

Sarbanes-Oxley

Export Administration Regulations (EAR)

Customs regulations

SEC regulations

GAAP & IAS

Master the Cs

Master the Matrix Know Your Customer---Character Choose The Path Willing Unable Able Unwilling

Master the Matrix Know Thy Customer---Character Choose The Path Willing Unable Able Unwilling

Master the Matrix [Sales focus] Classify your Customer---Character Willing Unable Able Pursue!!! Unwilling Find Deal Enhancers & Enablers Work on Desire and Willingness Abandon The Prospect!!!

Master the Matrix [Credit focus] Classify your Customer---Character Willing Unable Able Approve!!! Unwilling Think Outside The Box Seek Alternatives Work the Deal Protect Your Transaction Reject This Applicant!!!

Master the Matrix [Collection Focus] Classify your Customer---Character Willing Unable Able Great!!! Unwilling Work With Your Customer Pursue Vigorously Third Party Involvement Write-Off Cancel Don’t Waste your time

Master the 18 basic Cs Of Domestic Credit

1. Character 2. Capacity 3. Capital

1. Character

4. Collateral -- guarantees 5. Conditions -- business economic, political industry

6. Computers -- technological state 7. Common Sense 8. Credit Insurance

9. Communication The interpersonal Cs 10. Cooperation 12. Courtesy 11. Collaboration

The interpersonal Cs

13. Carelessness The Negative Cs 14. Complacency 15. Competition

The Negative Cs

16. Concern The Positive Cs 17. Compassion 18. Care

The Positive Cs

2. Currency Control -FX Risk 1. Country Risk 3. Cultural Differences The International Cs

The International Cs

C -- CREATIVITY I -- INNOVATION S -- SPEED A -- AGILITY A --ACCURACY C --COURTESY

C -- CREATIVITY

I -- INNOVATION

S -- SPEED

A -- AGILITY

A --ACCURACY

C --COURTESY

Flexibility and willingness to change Open-mindedness Negotiating skills Honesty and integrity Leadership Dedication, dependability and reliability Love of learning ( continuous education) The Mark of True Credit Professionals

Flexibility and willingness to change

Open-mindedness

Negotiating skills

Honesty and integrity

Leadership

Dedication, dependability and reliability

Love of learning ( continuous education)

“ We make a living by what we get, we make a life by what we give .” Sir Winston Churchill

ERS Consulting Services Eddy Sumar, MBA, CCE, CICE, CEW 7841 Leucite Avenue Rancho Cucamonga, CA. 91730 909-481-9869 [email_address] Thank You!

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