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Using Trade Reference As Part Of Credit Vetting Procedures

In the credit application form we can put a request to the customer for the names of his trade references.

Why is this so? The taking of references has becomingly more common. Seeking trade references can greatly help the credit manager/controller in the credit vetting of his customer. So we should make it as easy or convenient as possible for the referee(s) to reply. One way is the use of pre-printed form and stamped addressed envelope. Once a trade reference is sought, the credit controller should follow up with a telephone call if he has still not received any reply.

Below is a sample of A REQUEST FOR A TRADE REFERENCE

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Why Should Credit Limit Be Imposed.Is it necessary for the company to inform the customer about its credit limit and credit terms?

In credit control or management, it is important to set credit limit for each customer. By setting credit limit, it has the following advantages:

the firm is able to limit its credit risk or losses caused by fraud or a sudden worsening of a customer’s position.
Having credit limit set means that modest check or no check needs [...]

ALL TOPICS COVERED UNDER THE HEADING-CREDIT MANAGEMENT/CREDIT CONTROL

All the topics for Credit Management are segmented into the following sections:-

GENERAL/INTRODUCTION

Credit Management:An overview of Its Importance And Characteristic of a well run credit management department.

Roles Or Functions Of Credit Management

Credit Management-Costs In Extending Credit /Return on Investment on Account Receivables.

ACCOUNTING/DOCUMENTATION

Credit Management-The Importance of Proper Documentation.

Accounting Treatment & Workflow on Write Off Bad Debts and Provision [...]

Time-The Critical Factor In Credit Control/Management

Needless to say that when debtors are not paying us on time, we need to raise our alertness level as this can ultimately lead to a future bad debt.

So what might be some of the warning signs of a future bad debt?

Some examples are as follows:

longer credit terms taken with approval, particularly for smaller orders
use of [...]

Use The Corporate Guarantee Form When Granting Credit Facility To Your Customer Who Belongs To A Group of Companies

During the credit vetting process of granting a new credit facility or additional credit amount to the customer, you might notice from the Application Form that a particular customer belongs to a group of companies. You might find that the credit standing based on all your financial and non-financial ratios on this stand-alone company might not qualify it for new or additional credit facility from your company.

So what can you do as a Credit Manager?
Attached below is a sample of a Corporate Guarantee that you might be able to use to persuade the customer to bring forth to its holding company to guarantee the amount of credit given by your company.

This Corporate Guarantee acts as a sort of “collateral”.

When the subsidiary company whom you have granted the credit facility fails in its obligations to pay, your company can then have the recourse to seek payment from the customer’s holding company which has a higher or better credit standing.

More often, nowadays, a holding company normally uses its management company or a special vehicle company (for example, a realty company for a special project) to obtain credit facilities from its suppliers.

Once this Corporate Guarantee has been signed and a Board Resolution raised, this might hopefully make them aware that your company is a bit “more special/preferential” than its other unsecured creditors.

Continue reading Use The Corporate Guarantee Form When Granting Credit Facility To Your Customer Who Belongs To A Group of Companies

FINANCE ACCOUNTING COACH | Free Online Accountant Reference Site

Using Trade Reference As Part Of Credit Vetting Procedures

Why Should Credit Limit Be Imposed.Is it necessary for the company to inform the customer about its credit limit and credit terms?

ALL TOPICS COVERED UNDER THE HEADING-CREDIT MANAGEMENT/CREDIT CONTROL

Time-The Critical Factor In Credit Control/Management

Use The Corporate Guarantee Form When Granting Credit Facility To Your Customer Who Belongs To A Group of Companies

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