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24 Cards in this Set
- Front
- Back
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Credit terms |
The terms on which credit is made available to a customer; they will invoice the credit period, amount, discounts, payment details, late penalties |
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Cash terms |
Immediate payment |
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Net monthly |
Payment of a months supplies is due at the end of the following month |
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Net 30 days |
Payment of a supply of goods is due 30 days after delivery |
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Settlement discount |
Discount given for an early settlement of invoices |
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Interest penalties |
Penalties charged on amounts outstanding after the due date of payment charged to a fixed rate of interest |
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Late payment of commercial debts act 1998 |
Allows suppliers to charge interest on overdue amounts |
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Retention of title |
The right of a seller of goods to retain ownership until payment is made |
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Credit insurance |
Insurance of the supplier of goods against irrecoverable debts incurred - cover available for a range of combination of customers |
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Granting credit summary |
Decision involves a variety of different factors involving levels of risk: internal and external credit information, nature of the ownership of the organisation, it's location, amount of information available and the level of risk attached to the sales policy |
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Refusal of credit summary |
Communication to the potential customer should be carried out in a tactful and diplomatic way and the opportunity to trade on cash terms offered |
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Credit terms summary |
Include: Credit period Credit limit Payment terms Details of discount Payment instructions Interest penalties on late payments |
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Settlement discount summary |
Most cost effective when interest rates are high. Annual cost worked out by formula and compared with the current cost of borrowing or interest rates for investing |
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Retention of title summary |
Enable them to recover goods sold of the buyer becomes insolvent |
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Credit control process |
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Granting credit - factors |
Ownership of the customer Overseas customers Amount of information available Sales policy |
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Ownership of the customer |
Will often determine the level of risk involved when granting credit. Small business are more risky - less backing |
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Overseas companies |
High risk. Problems sending and receiving currency payments. Also could be complications with legal systems |
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Amount of information available |
Limited information available. Which makes a credit decision hard to make. Initial refusal of credit, with a review in 6 months time. |
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Sales policy |
Tension between sales department and credit control department. Sales department want to obtain as many sales as possible but the credit control department see high risks involved. |
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Refusing credit |
Difficult decision. In danger of losing a potential customer to another supplier. Potential customer will lose both a supplier and a source of liquidity. Supplier is likely to suggest cash trading. Treat the matter with tact and diplomacy |
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Half way house credit |
Shorter credit periods Part payment This reduces the risk of the customer not paying and helps maintain a good customer |
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Changes in credit terms |
Could be: an increase limit or a longer payment period. Factors to examine: Amount of the increase - is it enough?, is it justifiable? Has the customer kept within the existing limit? Trading history |
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Credit control policies and procedures |
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