Credit Administration Policy

Course : Managerial Finance Lecture : Marc Credit Hours : 3 Credits Semester Sessions : 3 Semester, 2021/2022 Session Prepared By : Kenzo LECTURE NOTES Credit Administration Policy In determining credit policy, credit issues administration policy or policy in handling administration of the credit provided, is a factor that very important because of the success or failure of credit policies what is implemented will depend on whether it is successful or not The company gets paid for its sales did it. In handling this credit administration, it needs to be established a separate section that specifically regulates systems and procedures for matters relating to credit granted company to its customers. These systems and procedures include: a. Billing systems and procedures. b. Periodic reporting systems and procedures to management. c. Periodic on-site review systems and procedures subscriber. d. Systems and procedures for regular review of eligibility subscription credit. e. Systems and procedures for handling bad credit. Assessment of Changes in Credit Policy. The leadership of a company needs to reassess regarding the credit policy that has been adopted so that Besides being able to encourage increased sales, it can also speed up the billing period. One assessment model that is quite flexible is to base it on the net gain or loss resulting from the change credit policy. Things to consider in the assessment includes price differences, costs, cash discounts, losses due to doubtful debts, when cash flows occur, influence on inventory and growth rates, both overall or a combination of several of these factors. Sources of Receivables Financing 1. Factoring Factoring is a way to shop the company's trade receivables by selling the receivables owned by a financial institution, namely Factor, is an institution that specializes in purchasing letters letters of receivable that have not yet matured on a discount basis. Sales of receivables to factors can be carried out on the basis of the right of regress or without the right of regress. If the receivable note is sold with the right of regress, it means that the The buyer can sue the seller, if the buyer does not can collect the receivables. On the other hand, if the receivable letter is sold without the right of regress, means the risk of uncollectible receivables is the buyer's responsibility. 2. Pledge of Accounts Receivable Source of spending in this way, where the company mortgages its receivables in order to obtain loan from a financial institution. Pawning of receivables is always with the right of regress and Companies that mortgage receivables are usually asked to binding the pawn agreement with a bond which is called collateral collateral or assignment of accounts receivable. Usually advances or loans are given with mortgaging receivables is much lower than the amount receivable mortgaged and the size of the expected margin depending on the credit worthiness of the company mortgaging the receivables and the quality of the receivables Alone