Credit Management

Question 1

“Remember, that money is of prolific, generating nature. Money can beget money, and its offspring can beget more, and so on… The more there is of it, the more there is of it, the more it produces every turning, so that the profits rise quicker and quicker”

Answer 1

Benjamin Franklin

Question 2

the discipline of reviewing, analyzing and setting the term of requests for credit for a business

Answer 2

Credit Management

Question 3

series of interlinked processes and workflows that allow your accounts receivable team to manage business’s cash flow by following up on payments and collecting overdue invoices ASAP

Answer 3

Credit Management

Question 4

involves pursuing the payment of debts that are past due, process of contacting the borrower who owes the debt and negotiating a payment plan or requesting immediate payment in full

Answer 4

Debt Collections

Question 5

Main Components of Credit Management

Answer 5

Assessing an approving new clients, Setting Payment terms, Extending credit to existing customers, Tracking customer credit

Question 6

Primary Objective of Credit Management

Answer 6

Avoidance of excessive debt

Question 7

Key objectives of Credit Management

Answer 7

Safeguarding Customer Risk, Settlement of outstanding balances, Improving cash flow

Question 8

Functions of the Credit Department

Answer 8

Gathering Credit Information, Analyzing Credit Information, Credit Checking and authorization, Filing and Recoding, Credit Adjustments, Collection Correspondence

Question 9

In charge of applying the standard tests and measurements for performance

Answer 9

Credit Analyst

Question 10

Risk of repayment, the possibility that an obligor will fail to perform as agreed

Answer 10

Credit Risk

Question 11

also a source of liquidity when used as collateral for borrowings

Answer 11

Loans

Question 12

present primarily in the loan disbursements and credit administration processes

Answer 12

Transaction Risk

Question 13

Risk associated with lending

Answer 13

Credit
Liquidity
Transaction
Compliance
Reputation

Question 14

Primary Advantage of Credit Management

Answer 14

Business Continuity

Question 15

Ensure that delinquent accounts are reconciled and paid in a timely, cost-effective manner

Answer 15

Collection Department

Question 16

Factors to Consider in Deciding the Collection Department Structure

Answer 16

Based on Operational Duties,
Based on Skills

Question 17

Based on Operational Duties

Answer 17

Frontline Contact Centre,
Back office,
Control Team

Question 18

deals directly with customers

Answer 18

Frontline Contact Centre

Question 19

Accounting and Settlement Tasks

Answer 19

Back Office

Question 20

Centralizes all processes at the firm

Answer 20

Control Team

Question 21

Based on Skills

Answer 21

Evaluation of the operation volumes,
Evaluation of the responsibilities on all credit and collection procedure

Question 22

RACI Matrix

Answer 22

Responsible
Accountable
Consulted
Informed

Question 23

Customer Care Department

Answer 23

Responsible

Question 24

Finance

Answer 24

Accountable

Question 25

IT, Marketing Sales

Answer 25

Consulted

Question 26

VP Sales, Marketing, Finance

Answer 26

Informed

Question 27

Common staff of collection Department

Answer 27

Credit Analyst
AR Manager
AR Analyst/Collection Analyst/Collection Specialist
Collector/Collection Officer
Compliance Analyst/Collection Risk Management Specialist
Collections Consultant/ Treasurer

Question 28

Parameters that influence collection department structure

Answer 28

Volume of Invoices, Payments, Receivable Accounts
Number of Active Customers
Payment Methods

Question 29

Measure of the average number of days that it takes a company to collect payment for a sale

Answer 29

Day Sales Outstanding

Question 30

Importance of DSO

Answer 30

A key driver of cash flow,
A key indicator of a company’s financial health,
Factors that lenders and investors consider when evaluating a company’s creditworthiness,
Used to assess customer satisfaction

Question 31

(AR/Total Credit Sales) x Number of Days

Answer 31

DSO

Question 32

Ideal DSO

Answer 32

45 days

Question 33

DSO can be affected by:

Answer 33

Seasonal Fluctuations and Changes in credit terms

Question 34

He should know and understand the goals, objectives, and policies of the company, of the other company, of the other departments in the organization, and of his own department.

Answer 34

Competence and Capability

Question 35

A good credit man must have the ability to effectively convey his ideas.

Answer 35

Communication

Question 36

putting your attention on advantageous solutions, attempting to forge relationships that benefit both parties, and bringing value to the company. He must take a proactive and constructive stance when managing credit and collections.

Answer 36

Constructiveness

Question 37

He must keep pace with changing times and changing conditions.

Answer 37

Creativity

Question 38

He must be devoted and dedicated to his job.

Answer 38

Conscientiousness

Question 39

He must be consistent in making credit decisions.

Answer 39

Consistency

Question 40

He must not only act with certainty and accuracy but also with swiftness and speed.

Answer 40

Certitude and Celerity

Question 41

A credit man must have good skip tracing skills, maybe in the field or online, in order to gather and verify the information given by the customer.

Answer 41

Contact

Question 42

He must also have character, honesty, integrity, and reliability.

Answer 42

Character

Question 43

He must be trusted by the debtor to have reciprocity of confidence between the credit man and the customer.

Answer 43

Confidence

Question 44

He must have basic knowledge of computers and the ins and outs of information technology.

Answer 44

Computer Literate

Question 45

people equipped with pleasing personalities.

Answer 45

Congeniality

Question 46

handling the concern of customers regarding the credit process makes them feel that they are respected.

Answer 46

Considerateness

Question 47

He should have the fundamental capacity for perception, understanding, and judgment that is possessed by almost everyone.

Answer 47

Common Sense