Contents - Ashgate

Contents 

List of figures 

Notes on contributors 

Foreword 

Introduction 

xi 

xiii 

xv 

xvii 

PART I: THE CREDIT MANAGEMENT FUNCTION 1 

1 Credit past and future 3 

Glen Bullivant 

Origins; The role of credit and its importance in the economy; Capital and 

credit; The development of consumer and export credit; Secured and unsecured 

credit; Information technology; External services; Credit management 

as a profession; Coping with change and the path forward 

2 The financial effects of credit management 19 


The cost of credit; Free credit?; The effect of credit on profits; The effect of 

credit on liquidity; The financing of credit; Cash flow; Measurement of debtors; 

Cash targets; Planning and budgeting debtors; Summary 

3 Credit policy and organization 36 


A credit policy; The key features of a credit policy; Credit risk policy; Credit 

policy for export sales; The functions of a credit department; The role of the 

credit manager; Reporting structure and organization; The qualities of the 

credit manager; Credit staff and their training 

v

CREDIT MANAGEMENT HANDBOOK 

PART II: CREDIT TERMS AND CONDITIONS OF SALE 61 

4 Credit terms and conditions of sale 63 


Credit terms; The factors affecting credit terms; Conditions of sale; Types 

of credit terms; Cash discounts; Late payment interest; Progress payments, 

retentions and consignment accounts; Methods of payment 

PART III: ASSESSING CREDIT RISK 79 

5 Assessing risks in trade credit 81 


Credit assessment overview; Marketing and risk assessment; Customer 

identity – types of customer; Trade credit information and its sources; Financial 

statements; Interpretation of accounts; Summary 

6 Credit ratings and risk categories 121 


Why have credit ratings?; Calculating credit ratings; Risk categories; Identifying 

and dealing with high-risk accounts; Bad debt reserves; Effective 

credit management 

7 Predicting corporate insolvency by computer 140 


Background; Developing and using a solvency model; Credit management 

applications 

8 Insolvency warning signs 146 


Background; Attitude; The three phases of failure; Can it be avoided?; Conclusion 

PART IV: SALES LEDGER 159 

9 Sales ledger administration 161 


Administration and format; Statements; Disputes and queries; Cash matching; 

Collection aids; Controls 

10 Computer systems for credit management 175 


System requirements; The sales ledger and customer file 

vi

CONTENTS 

PART V: CASH COLLECTION 187 

11 Collecting trade debts 189 


The front end; Collection attitudes; Days sales outstanding (DSO) and cash 

targets; Incentives; Computer aids to collection; Methods; The future 

12 Telephone collection 226 


The telephone; Staff; Making the call; Customer excuses; Win-win; Conclusion 

13 Using collection agencies 246 


The collection agency; The right agency?; Choosing the agency; The CSA 

14 Planning, measuring and reporting debtors 251 

Burt Edwards 

The need to plan debtors and then to report the results; The powerful tool 

– the DSO ratio; Budgets and reports; Measurable items 

PART VI: CREDIT INSURANCE 275 

15 Home trade credit insurance 277 

T Glyndwr Powell 

Introduction; Features of credit insurance policies; When does cover commence?; 

Benefits of credit insurance; Importance of brokers; Captives and 

mutuals; Domestic credit insurers; Further reading; Useful addresses 

16 Export credit insurance 295 


Introduction; Differences between domestic and export credit insurance; 

Country (political) risks; Commercial (customer) risks; Pre-shipment 

cover: suitable for companies making specialist goods to order and not 

easily resold elsewhere; Level of indemnity; Credit insurance compared to 

confirmed letters of credit; Sources of export cover; The UK’s governmentsupported 

export credit agency – ECGD – and medium-term credit; Further 

reading; Useful addresses 

vii

CREDIT MANAGEMENT HANDBOOK 

PART VII: EXPORT CREDIT AND FINANCE 305 

17 Export credit and collections 307 

Burt Edwards 

Exporting is expensive – so manage the expense!; Time and cost in export 

payments; Effective conditions of sale; Agents, distributors and subsidiaries; 

Export documents; Payment terms; Countertrade; Tender and performance 

bonds; Getting funds transferred from abroad; Checking the risk of payment 

delays; Information on country (political) risks; Information on customer 

risks; Evaluating customer risks; Codifying information; Collecting overdues 

– an overview; A systematic approach; A word about foreign currency; 

Checklist: to speed export cash; The future for export collections; Think 

international 

18 Export finance 341 

Burt Edwards 

The need for special money for exports; Enhanced overdraft; Bill advances 

and negotiation; Export finance banks; Finance from letters of credit; ECGDbacked 

finance: medium-term credit; The international consensus 

19 Foreign exchange 350 

Burt Edwards 

The credit manager and foreign currency; The history of foreign exchange; 

Present day foreign exchange markets; Dealing operations; Press charts of 

foreign currency rates; Exchange risks and how to cover them; The European 

Monetary System and ECU, leading to the Euro; The UK and the Euro; 

Summary; Glossary of foreign exchange terms 

PART VIII: CONSUMER CREDIT 367 

20 Retail credit management 369 


Securing finance for the credit operation; Relationship with finance houses; 

Types of credit available; Credit policy; Controlling the risk; Collecting 

accounts; Collection letters by computer; Management information and 

reports 

21 Consumer credit law 396 

Peter C Coupe 

Introduction; Development of consumer credit law; The Consumer Credit 

Act; The Data Protection Act 1998; Other laws; Codes of practice; Conclusion 

and further reading 

viii

CONTENTS 

PART IX: COMMERCIAL CREDIT LAW 417 

22 Legal action for debt recovery 419 

Robert Addlestone and Gareth Allen 

Pre-action steps; Alternative dispute resolution (ADR); Information needed 

to commence proceedings; Issuing the claim form; Completing the form; 

Service of the claim form; The next stage; Defended actions; Enforcement 

23 Insolvency procedures 449 

Malcolm Cork 

Introduction; Personal insolvency; Partnerships; Corporate insolvency; Creditors’ 

voluntary liquidation; Members’ voluntary liquidation; Receivership; 

Company voluntary arrangement; Administration order; Informal schemes 

PART X: CREDIT SERVICES 469 

24 Invoice financing 471 

Ted Ettershank 

What’s the difference between factoring and invoice discounting?; How 

does invoice financing work?; How does factoring work?; How does invoice 

discounting vary from factoring?; When to use factoring; Points to be aware 

of when considering invoice financing; Choosing a factor 

25 Credit cards 475 

Peter C Coupe 

Introduction; What are credit cards?; Early development in the USA; UK market 

development; Credit and debit card spending and borrowing; The cost 

of credit; The cost of payments; The cost of promoting cards; Fraud and bad 

debt; Chips and electronic purse 

26 Sales finance and leasing 492 


Introduction to sales finance; Benefits of sales finance to buyer and seller; 

Types of sales finance; Funding the credit advanced; Which product is best 

for what?; Summary; Sources of information; Further reading 

Appendix 515 


Membership organizations for credit management personnel; Training and 

consultancy services for credit management; Sources of credit information; 

Useful addresses; Useful credit publications; Query management systems; 

The better payment practice group; Credit policy and procedures; Suggested 

contents for a credit manual 

Index 541 

ix

Contents - Ashgate

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