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• Credit Management


  A company's action plan to guard against late payments or defaults by customers
• Effective Credit Management


  • Prevents late payment or non-payment
  • Reinforces the company's financial or liquidity position
  • Critical component in any business
• Importance of Credit Management

  • Faster and more complete debt recovery
  • Better cash flow management
  • Save on cost such as administrative cost
  • Staff suited for demand collection
  • Protection of brand image
• 5 C's of Credit


  • Character (willingness to pay or integrity)
  • Capacity (financial capability to repay)
  • Capital (financial position when borrowing)
  • Condition (external factors influencing repayment)
  • Collateral (security for repayment)

  
• Credit Manager


  • Needs to know the financial ability of customers
  • Assess how much credit to allow
  • Process orders quickly
  • Collect funds on time
  • Needs interpersonal skills, training and effort
• Cost of Credit


  Fees (charged by financial institutions) and Interest (amount charged for using their money)
• Fixed Rate


  Interest rate stays the same throughout the loan term
• Variable Rate


  Interest rate might change during the loan term
• Truth in Lending Disclosures

  • Amount financed
  • Annual Percentage Rate (APR)
  • Finance charge
  • Total payments
• When a client did not consider the cost of credit in the future

  Possible negative consequences
• Credit management involves much more than just reminding customers to pay
• Over half of all bankruptcies are attributed to poor credit management
• RA 10870 (An Act Regulating the Philippine Credit Card Industry)