the art of credit management
DESCRIPTION
WRCC The Art of Credit ManagementTRANSCRIPT
ER$ Consulting Services
In Collaboration with CMA
Presents
The Art of Credit Management
October 19, 2007
Las Vegas
ByEddy A. Sumar, MBA, CCE, CICE
A Fundamental Checklist
for the Success
of Every Credit Professional
Construct Your
Checklist!Gather The Ingredients!
"It is not the mountain we conquer, but
ourselves."
- Sir Edmund Hillary
Define Credit
Credit comes from the Latin word “credere,” which means trust. It is a mutual trust between the grantor and recipient of the credit. It involves a great deal of
trust and confidence in the ability, willingness and character of a “debtor” to deliver on its promises to the
“creditor,” according to agreed upon terms. Credit also implies a reciprocal trust that the creditor will deliver what was contracted or agreed upon. Thus, credit is “a cooperative function between seller and
buyer or between creditor and debtor.
Credit Redefined
1. A Sales Tool
2. A Marketing Tool
3. Financial Vehicle
4. Strategic Alliance
“Before you can score, you must first have a goal”
“A Fundamental Checklist”
-- Anonymous
Know Your Vision
Your Goals
Company Vision--Goals
Your Dept Vision--Goals
Credit and Sales—One TeamCredit is a Sales & Marketing ToolCredit Department becomes a
Center for Client Services
Vision
Understand Your Mission
PurposeReason for company existenceStrategyWay of doing things
[behavior & standards]Values
Mission
Understand Your Company Culture
Conservative Liberal Profit-oriented Customer-centric Sales & Marketing-oriented
Culture
Construct
Your Policies & Procedures
Reflect the mission & vision Reflect the culture Encode your standards & behaviors Reflect your values All encompassing of your functions
New customer policy Credit investigation policy Credit analysis policy Authority level policy Credit limit policy
Policies & Procedures Credit & Collection
All encompassing of your functions (Continued)
Credit terms policy Credit hold Policy Periodic credit review policy Collection policy Cash application policy Dispute resolution policy Third party referral policy Bad debt and write-off policy Record keeping & disclosure policy
Policies & ProceduresCredit & Collection
Chart the Process
Set-up sheetCredit applicationCredit reportsTrade ReferencesBank referencesFinancial statements
Credit scoringFinancial ratios analysis Z score
Salesman’s Comments
Chart the processFor new accounts
Security instrumentsL/CStandby L/CGuaranteesPromissory notesSecurity agreements & UCC filingLiens
Credit insuranceTrade financing alternatives
Chart the processFor new accounts (Continued)
Call, e-mail, send letters & back upInvolve your sales forceInitiate payment plansInvolve your in-house legal departmentRefer to collectionRefer to outside legalPut an account on bad debt listWrite-off
Chart the processFor collection & write-off
Know the legal
& Regulatory Environment
Fair Credit Reporting ActFair Debt Collection Practices ActTruth-in-Lending ActEqual Credit Opportunity Act (ECOA)Anti-trust Regulations
Sherman Act 1890Clayton Act 1914Robinson-Patman Act 1936FTC Act 1914
Know the legal Environment
Bankruptcy Act (BAPCPA)Money Laundering ActThe Patriot ActSarbanes-OxleyExport Administration Regulations (EAR)Customs regulationsSEC regulationsGAAP & IAS
Know the legal Environment
Master the Cs
Willing
Unable
Able
Unwilling
Know Your Customer---CharacterChoose The Path
Master the Matrix
Willing
Unable
Able
Unwilling
Know Thy Customer---CharacterChoose The Path
Master the Matrix
Willing
Unable
AblePursue!!!
Unwilling
Find DealEnhancers& Enablers
Work on Desire and Willingness
AbandonThe
Prospect!!!
Classify your Customer---Character
Master the Matrix [Sales focus]
Willing
Unable
AbleApprove!!!
Unwilling
Think OutsideThe Box
Seek Alternatives
Work the DealProtect YourTransaction
Reject This
Applicant!!!
Classify your Customer---Character
Master the Matrix [Credit focus]
Willing
Unable
AbleGreat!!!
Unwilling
Work WithYour Customer
Pursue VigorouslyThird Party Involvement
Write-OffCancel
Don’t Waste your time
Classify your Customer---Character
Master the Matrix [Collection Focus]
Master the 18 basic Cs
Of Domestic Credit
1. Character
2. Capacity
3. Capital
4. Collateral -- guarantees
5. Conditions -- business economic,
political
industry
6. Computers --
technological state
7. Common Sense
8. Credit Insurance
9. Communication
–The interpersonal Cs
10. Cooperation
12. Courtesy
11. Collaboration
13. Carelessness
–The Negative Cs
14. Complacency
15. Competition
16. Concern
–The Positive Cs
17. Compassion
18. Care
2. Currency Control -FX Risk
1. Country Risk
3. Cultural Differences
The International Cs
• C -- CREATIVITY
• I -- INNOVATION
• S -- SPEED
• A -- AGILITY
• A --ACCURACY
• C --COURTESY
Flexibility and willingness to change Open-mindedness Negotiating skills Honesty and integrity Leadership Dedication, dependability and reliability Love of learning (continuous education)
The Mark of True Credit Professionals
“We make a living by what we get, we make a life by what we give.”
Sir Winston Churchill
ERS Consulting ServicesEddy Sumar, MBA, CCE, CICE, CEW7841 Leucite AvenueRancho Cucamonga, CA. 91730
Thank You!