What are the usual steps in credit management?

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What are the usual steps in credit management?



Answer: - The first step in credit management is to set normal TERMS OF SALE. This means that you must decide the length of the payment period and the size of any cash discounts. In most industries these conditions are standardized.
- Your second step is to decide the form of the contract with your customer. Most domestic sales are made on OPEN ACCOUNT. In this case the only evidence that the customer owes you money is the entry in your ledger and a receipt signed by the customer. Sometimes, you may require a more formal commitment before you deliver the goods. For example, the supplier may arrange for the customer to provide a trade acceptance.
- The third task is to access each customer's creditworthiness.
- When you have made an assessment of the customer's credit standing, the fourth step is to establish sensible credit policy.
- Finally, once the credit policy is set, you need to establish a collection policy to identify and pursue slow payers.

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