Question

The creation and carrying of accounts receivable has both direct and indirect costs, but it can also have the enormous benefit of increasing sales. Let’s talk about how you would establish a brand new credit department in a company whose approval is required for all sales.

What would you do first if you were the Credit Manager?

How would you determine that customers were qualified to buy from you on open account ?

Answer 1

Steps taken as the credit manager

1. First check how much of the sales is cash and how much is credit.

2. Try to keep the credit period minimum

3. Keep reasonable credit period for places from where more revenue is generated.

4. Try to convert credit sales to cash where there is a likely default possibility.

5. Track the history of all the debtors.

Determine customers quality to buy on open acvount

1. Track history of defaulting debtors nd don't open an account for people who have defaulted more often.

2. Find debtors contributing highly to sales , open an account for them.

3. Open a counts for people who pay cash to give them an option to pay via credit if they ask for the switch.