Earlier article describe why the need to keep proper sales ledger. Incidentally, sale ledger section is also known as account receivable section in some companies. The Account receivable/sale ledger section involves in the billing and follow up of the customer on credit and other roles.

At all times, management must ensure that the finance/credit department should implement a properly run computerized sales ledger which should have the following features to assist in credit control:

• ageing of debtors by DUE DATE
• on line enquires on- credit limits, individual order limits, whether the customer is ” on stop”
• flagging of overdue accounts for follow-up by credit control
• attributing bad debts or high credit costs to salespersons or sales office responsible
• identifying consistently slow payers.

Related posts:

1. Why Do We Need To Keep A Proper Sales Ledger To Help In Credit Management
2. What Are The Roles/Function Of Credit Management Department
3. Salient Features of a Good Credit Policy and Procedures Manual
4. Credit Management: Proper Documentation
5. Credit Management: An Overview, its Importance and Characteristic of a Company having a well run credit management department
6. How To Be Proactive To Offer Alternatives For Marginal Customers Or Those Who Want To Increase The Credit Limit/Terms
7. Why Should Credit Limit Be Imposed.Is it necessary for the company to inform the customer about its credit limit and credit terms?

It is important for both accountant and credit controller to understand the importance of keepng a proper sale ledger. In fact the sales ledger is an essential source of internal information about credit performance and it should be regularly updated for new invoices, credit notes and cash received in order to:

• produce accurate management information
• recognize as early as possible debtors who are slowing down payments
• prevent the chasing of debts already settled
• identify customers who have reached their credit limit
• ensure customers comply with any agreed payment schedule

Related posts:

1. How Can Computerized Sales Ledger Assists In Credit Management
2. Time-The Critical Factor In Credit Control/Management
3. What Are The Roles/Function Of Credit Management Department
4. Credit Management: Proper Documentation
5. Credit Management: Costs in Extending Credit & ROI on Receivables
6. Performance Management/Measurements/KPI used in Credit Management/Credit Control
7. ALL TOPICS COVERED UNDER THE HEADING-CREDIT MANAGEMENT/CREDIT CONTROL

Very often, when an inexperienced credit personnel called a deliquent debtor for settlement of his account, he or she will give many excuses(see earlier article on delaying tactics) hence it is very important to arm oneself with the relevant information. So what are such information?

Append beow are some information that we should have before calling the deliquent debtor for money:

• the total amount owing;
• month-by-month figures showing how much is overdue;
• a list of invoices making up these figures
• information about any queries or unresolved disputes;
• information about the account’s history
• details of any promises earlier made for amounts earlier promised, dates and names who promise 

Related posts:

1. Name Some Delaying Tactics That Delinquent Debtors Use
2. What Are The Roles/Function Of Credit Management Department
3. Debts Collection by Telephone
4. Salient Features of a Good Credit Policy and Procedures Manual
5. Use The Corporate Guarantee Form When Granting Credit Facility To Your Customer Who Belongs To A Group of Companies

[ click for more articles on credit management]

In earlier article, we have said that we need to inform the customers of their credit limits. As time pass or when the customer requests higher credit limit, what should we base on to increase or decrease his credit limit? 

Append below are some of the major factors to consider when setting up a higher credit limit: 

• Customer’s track record in terms of payment-prompt, average, slow or very slow?
• Volume of current business
• How is the industry and economy moving
• What collateral if any is available –additional guarantees, letter of credits?
• What is the volume of business of other competitors
• Credit limit of competitors
• Other market information
• What are his other business activities and how it is developing

Related posts:

1. Why Should Credit Limit Be Imposed.Is it necessary for the company to inform the customer about its credit limit and credit terms?
2. Non-Financial and Qualitative Factors in Credit Decision
3. How To Be Proactive To Offer Alternatives For Marginal Customers Or Those Who Want To Increase The Credit Limit/Terms
4. Use The Corporate Guarantee Form When Granting Credit Facility To Your Customer Who Belongs To A Group of Companies
5. Using Trade Reference As Part Of Credit Vetting Procedures
6. Balanced Scorecard: Examples Of Customer Perspective KPI
7. Ratio Analysis : What Other Factors, Beyond Ratios, Need To Be Considered?

[ click for more articles on credit management]

To enable an effective follow up on customer’s overdue account, the credit controller should at least try to classify or categorize the customers into the following risk categories. However, try to be too rigid as these following risk profiles can change over a period of time whether for good or bad. 

Related posts:

1. What Factors To Consider When You Increase The Credit Limit Of A Customer
2. Why Should Credit Limit Be Imposed.Is it necessary for the company to inform the customer about its credit limit and credit terms?
3. Risk Management: Benefits of Managing Risks And Types of Risk
4. Significant Warning Signs That Your Customers Cannot Pay
5. How To Be Proactive To Offer Alternatives For Marginal Customers Or Those Who Want To Increase The Credit Limit/Terms
6. Balanced Scorecard: Examples Of Customer Perspective KPI
7. How Can Computerized Sales Ledger Assists In Credit Management

[ click for more articles on credit management]

In earlier article, we have mentioned that one of the greatest contribution, credit function can offer is to facilitate the increase in sales/profit/liquidity is by thinking more proactively with sales personnel in the managing of marginal customers or those who want to increase the credit limits/terms. 

The credit controller can explore the following alternatives: 

• Bank Guarantee ( See sample )
• Personal Guarantee from directors, shareholders or an accepted third party. By having such personal guarantee, the firm is then able to secure payment from the guarantors and to reach their personal assets if necessary.
• Corporate guarantee (See sample)
• Irrevocable Letter Of Credits from customer’s bank.
• Any other collaterals like stocks and shares, inventories by debenture or accounts receivable by assignment.

Related posts:

1. Why Should Credit Limit Be Imposed.Is it necessary for the company to inform the customer about its credit limit and credit terms?
2. What Factors To Consider When You Increase The Credit Limit Of A Customer
3. Use The Corporate Guarantee Form When Granting Credit Facility To Your Customer Who Belongs To A Group of Companies
4. Explain the terms-Guarantor and Guarantee
5. Sample Of A Bank Guarantee Agreement Used in Credit Control/ Management
6. What Are The Roles/Function Of Credit Management Department
7. A Simple Credit Vetting Or Evaluation Checklist

[ click for more articles on credit management] 

It always is easier to just to pull the firm’s delinquent customers to court when they cannot pay up. However, before doing so, it is strongly suggested that the firm should ponder upon the below factors before pursuing such actions otherwise this might ultimately lead to losing both time and money. 

• Can the customer pay?
• What are the costs involved eg legal costs
• The chances of success
• An understanding of the legal system
• The importance of acting quickly. In terms of filing the necessary documents to the stage of execution, time is always the essence.

Related posts:

1. Credit Management: A Brief Description of Litigation Or Legal Process & Workflow
2. Why Should Credit Limit Be Imposed.Is it necessary for the company to inform the customer about its credit limit and credit terms?
3. Factors To Consider In Sales Forecast, Production And Cash Forecast (Part 1 of 3)

[ click for more articles on credit management]

As a credit controller, one needs to be extra vigilant to detect any signs or symptoms that the customers are slowly turning into delinquent debtors which might need to bad debts. 

Append below are some important warning signs or symptoms that we should watch out: 

• Customer starts paying more slowly

• Payment of account using round–sum cherubs. The details of invoices are often ignored.

• Too many mistakes on cherubs

• People always unavailable

• Settlement discount not taken up

• Warning by credit agency

• Accounts file late and create accounting.

• Using the Altman Z scores and similar ratio analysis
• Unsatisfactory accounts

• The feeling that something is not right.

Related posts:

1. What Are The Features Of A Good Final Warning Letter. Draft A Sample Final Warning Letter.
2. Time-The Critical Factor In Credit Control/Management
3. How To Be Proactive To Offer Alternatives For Marginal Customers Or Those Who Want To Increase The Credit Limit/Terms
4. ALL TOPICS COVERED UNDER THE HEADING-CREDIT MANAGEMENT/CREDIT CONTROL
5. Managing Working Capital-Accounts Payable