Developing an effective trade credit policy

Learning Objectives:

  • To analyse the existing credit processes and procedures, identifying possible gaps and pitfalls;
  • To determine the factors that influence a credit policy within a given business context;
  • To understand the effect of a credit policy on the profitability of a business;
  • To identify a set of objectives for an effective credit policy;
  • To establish clear policies for a given credit function and the appropriate procedures in order to achieve the policies efficiently;
  • To understand clearly what to include in a credit policy manual/document;
  • To define the responsibilities to manage the credit profitably, including levels of authority;
  • To write a clearly defined credit policy document in an effective manner;
  • To identify the different circumstances when to override the credit policy;
  • To appreciate the importance of involving other stakeholders when developing an effective credit policy;
  • To corroborate with the top management team of the business organisation and to get it duly approved;
  • To understand how best to communicate the credit policy with various stakeholders for better implementation, management and control.

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