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Business Administration & Management. Mr. Bernstein Credit Principles and Practice, pp 479-492 June 11-2, 2014. Business Administration & Management Mr. Bernstein. When Do Businesses Extend Credit? When they believe it will increase sales
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Business Administration & Management Mr. Bernstein Credit Principles and Practice, pp 479-492 June 11-2, 2014
Business Administration & ManagementMr. Bernstein When Do Businesses Extend Credit? When they believe it will increase sales When they believe they are likely to be paid in full
Business Administration & ManagementMr. Bernstein Retail Business Credit Work with national credit card companies Establish a branded credit card Offer consumers credit plans Partner with finance co. (white label) Build in-house finance team
Business Administration & ManagementMr. Bernstein Credit Policies: The 3 C’s of Credit Character CapacityCapital
Business Administration & ManagementMr. Bernstein Establishing a Credit Policy Credit Department typically reviews and revises Should fit with company’s overall objectives Includes total capacity, application by product, sales terms, collateral, collection terms, pricing and exceptions
Business Administration & ManagementMr. Bernstein Analyzing Credit Sales Aging the Accounts – 30 days, 60 days, 90+ days Unpaid after 90 days: 73% chance of payment Unpaid after 1 year: 30% chance of payment Must monitor trends May need to “fire” some customers to preserve capital and balance sheet
