QUALITIES OF A GOOD CREDIT MANAGER

Many successful credit professionals can attest to the fact that they just found themselves in credit and with time they learn the tricks of credit, liked it and pursued a career in credit. The beauty with credit is that the results are measurable, it is either cash has been collected or not and if collected cash is in the bank or in the debtors balance respectively.

To be successful in credit the following qualities must be part of a credit professional;

  1. Great communication skills; without effective communication skills a credit professional will find it difficult to communicate with both internal and external customer. Credit management is about communication
  2. Analytical skills; a credit manager must have numerical ability to make sense out of numbers.
  3. Attention to details Skills; Accuracy is key in credit and a credit professional must ensure reconciliation and allocations are done accurately.
  4. Computer skills; success in credit depends on effective Information systems and therefore computer skills are essential.
  5. Be result Centered; a credit professional should be focused on achieving collection targets at all times. Achieving targets should be the driving force for a credit officer.
  6. Confidence; at all times a credit professional should portray confidence, he should be confidence about the numbers and the balances in the customer accounts. Without confidence, collections can be hard to make.
  7. Customer care skills; A credit professional should equip themselves with good customer care skills to enable them handle both internal and external customers.
  8. Business acumen; knowledge of the business should be in the fingertips of every credit professional. This is important because the business cycle cannot be complete without sales and collection.
  9. Positive attitude; a positive thinking should be embraced by every credit officer because without it success in collection will not be possible. There is need to be focused and friendly at all times.
  10. Courageous; without courage a credit professional will not be in a position to stand for what is right at all times and is likely to be swayed by others who fail to follow the laid down policies. There are many opposing forces to accredit professional within and outside the organization.
  11. Good Negotiator; collection go hand in hand with negotiation and it is essential that a credit officer equips himself with negotiation skills to handle customer skillfully when they fail to make payments on time.
  12. Investigation skills; a credit officer need to gather information at all times regarding their customers and it is essential have investigation skills.
  13. Legal Knowledge; A credit professional must understand all legal laws pertaining to credit and business operation. This is essential due to customer identification and for the purpose of legal recovery process.

In conclusion, every credit officer must work towards success of the organisation by ensuring customers are happy, cash flow is positive and that losses are minimized by ensuring all sales are collected on time. Success of an organisation can only be attained through sales, Cash collection and profitable sales made.

Advertisements
Posted in Uncategorized | Leave a comment

A CAREER IN CREDIT MANAGEMENT

Are you shopping for a marketable career for yourself, child or a sibling.  look no further and enroll for a credit management course with http://kasneb.or.ke/ . Certified Credit Professional is a relatively new course that one is assured of a job after the first sitting of the exams.

There are less than 1000 qualified credit professionals in the country and every employer is seeking to employ a qualified credit controller. After completion one attains a tittle of a CCP(K) and if you are already a CPA(K) you will only need to take a few papers to qualify for CCP.

Where to study?? Notes are available and all you need is to write an email to info@creditmanagement.co.ke and we shall advise you on how to get the notes.  Tumain Institute of Business studies will open its doors next year January 2018 to admit both day and evening classes to study the course.

Syllabus content

PART I

SECTION 1

PAPER NO. 1 CREDIT MANAGEMENT

PAPER NO.2 COMMERCIAL LAW

PAPER NO.3 ENTRPRENURESHIP AND COMMUNICATION

SECTION 2

PAPER NO.4 ECONOMICS

PAPER NO.5 PRINCIPLES OF ACCOUNTING

PAPER NO. 6 PRINCIPLES FINANCE AND TAXATION

PART II

SECTION 3

PAPER NO.7 COMPANY LAW

PAPER NO.8 FINANCIAL MANAGEMENT

PAPER NO.9 MARKETING AND PUBLIC RELATIONS

SECTION 4

PAPER NO. 10 LAW GOVERNING CREDIT PRACTICE

PAPER NO.11 MANAGEMENT INFORMATION SYSTEMS

PAPER NO.12 QUANTITATIVE ANALYSIS

PART III

SECTION 5

PAPER NO.13 STRATEGY, GOVERNANCE AND ETHICS

PAPER NO.14 BANKING LAW AND PRACTICE

PAPER NO.15 CREDIT MANAGEMENT IN THE FINANCIAL SECTOR

 

SECTION 6

PAPER NO.16 DEBT RECOVERY

PAPER NO.17 CORPORATE LENDING

PAPER NO.18 CREDIT PRACTICE

For more details check visit

PART III

SECTION 5

PAPER NO.13 STRATEGY, GOVERNANCE AND ETHICS

PAPER NO.14 BANKING LAW AND PRACTICE

PAPER NO.15 CREDIT MANAGEMENT IN THE FINANCIAL SECTOR

 

SECTION 6

PAPER NO.16 DEBT RECOVERY

PAPER NO.17 CORPORATE LENDING

PAPER NO.18 CREDIT PRACTICE

Posted in Uncategorized | Leave a comment

PARAMETERS FOR RETAIL CREDIT RATING

Retail credit refers to lending granted to individual or
groups for purchase of durables, house purchase or other financial needs.
Qualitative and quantitative parameters must be considered to establish the
borrower willingness to repay the loan and ability to service the loan as per
the lenders requirement.

Credit rating may be undertaken on the basis of exposure
size, duration of exposure, complexion of exposure and collateral/security
provided. The objective of rating is to ensure that the risk exposure is
minimal and acceptable. The parameters can be grouped in four broad categories:

    1. Personal Details

  • Age: to establish productive years of life
  •  Education qualification: probability of earning
    a higher income for loan repayment
  •  Marital status:Need for permanent settlement
  •  Number of dependent: impact on monthly outflow
  •  Mobility of the borrower in terms of location

2. Employment Details

  • Employment status: self employed or salaried
  • Designation
  •  Gross monthly income for ability to repay
  • Number of years in current employment

  3. Financial Details

  • Percentage of borrowers financing. Must be
    involved
  •  Borrowers worth in terms of assets
  •  Asset details like bank balances and securities

4. Additional Details of the Borrower

  •  Collateral status or security provided
  • Guarantor information
  •  Status of the borrower
  •  Account relationship
Posted in Uncategorized | Leave a comment

BENEFITS OF A CREDIT REFERENCE BUREAU

BENEFITS OF A CREDIT REFERENCE BUREAU
“if you don’t pay by ……… you will be blacklisted in the credit reference bureau” this is a common statement being used by most debt recovery staffs in most organizations. CRB has been painted as a Monster that has no good to the economy other than to threaten defaulters to pay their bills and debts. This kind of thinking is retrogressive and will only do harm to the economy.
Credit Reference bureau benefits both the lender and the borrower and it is a tool that can bring benefits to the world economy. In developing countries the CRB concept is very new and has not been widely accepted but with an increase in defaulters, it is gaining momentum but at a slow pace.
The benefits of a CRB should be a win-win situation that enables lenders to access good customers and also for customers with a good credit history to obtain credit at better terms. The benefits that accrue from a CRB are;
• Reputational collateral
• Business growth
• Improved margins
• Increased customer loyalty
• Improved revenue collection
• Fewer defaulters.
Credit reference Bureau therefore plays a role in the growth of the entire economy. Let’s embrace the concept for a better debt culture that benefits all.

Posted in Uncategorized | Tagged , , | 1 Comment

Credit Management

A sale can only be of benefit to an organization if it has been paid for or else it remains a cost in the books of accounts. Credit management is therefore essential and prerequisite to any businessman who wants his business to be a going concern.

Failure to do proper credit management has lead to the death of many profitable business , if you desire to have your business live longer after you exit the world, it is very important to put credit measures that will ensure payments are made on time by your credit customers.

The sole reason for Offering goods and services on credit is to maximize sales, if the credit is not well managed it can cause negative implications to the business.  Uncollected sales cause profit leakages through the cost of credit and capital in case the clients default.

Always communicate the terms of credit to your customers and ensure that they are paying on time, otherwise your high sales will be of no value to your business. A healthy bottom-line requires proper credit management measures for the survival of the business entity.

Credit control will not only grow your business alone but that of your customers as well.  Help your customers build a good credit history by paying you on time.

Posted in Uncategorized | Leave a comment

HOW SUPPLIERS AND LENDERS CAUSE THEIR CUSTOMER’S RUIN

Biting more than you can chew is a common phrase used to denote prudence, yet the phrase is rarely put to good use when it comes to interactions between suppliers and lenders.

In the recent times we have seen retail establishments thrive and expand, which is a natural course of business.
But behind some of these expansions are unhappy suppliers whose payments are not being paid on time, despite the fact that the retailer’s business is 99% cash. As retailers expand, they demand a more flexible credit limit in order to stock their new outlet(s), hence tying more of the supplier’s operational funds. Because every supplier is competing to have his/ her products on the retailer’s shelves, the supplier ends up extending credit in terms of goods and a more elastic repayment period as per terms dictated by the customer.

It is only prudent to establish if the person buying your goods on credit or borrowing your money has the financial capacity and willingness to repay back your money. If the business establishment or individual(s) has the ability, it would be wise to put a limit on how much can be advanced as credit and the length of time to settle the credit facility so advanced.
Always go through the why, how & when steps to establish a basis for extending the credit facility. Why-do you need the credit facility, How-will you meet your credit obligations, When- do you expect to pay back, are practical questions to ask a would be borrower /debtor, before extending credit.

Suppliers and lenders should never operate at the mercy of debtors and need to keep in mind that it is their money at stake in case of default.

As a supplier or a lender, it is important to understand your customer’s nature of business so as to establish the volume of credit and, the terms of credit to extend to them. If your customer runs a retail business, where most of their transactions are on cash basis, a shorter credit period would be ideal. Otherwise, extending longer credit repayment periods will choke the client (with excess cash) who, thinking that the money is his/ hers, is likely to divert such cash to other non-core activities, like real-estate or expansion.

It is important for suppliers and lenders to know that credit is a cost to the business and if not properly managed can lead to the loss of a budding client and collapse of their own valued business.

How do we mitigate against this loss.

• Have a credit policy in place detailing terms and conditions,
• Know your customers (KYC) well in terms of ability, capacity and the nature of business. Make use of business information reports which can be outsourced from independent contractors e.g. site verification and credit reports from credit reference bureaus,
• Employ qualified credit control staff,
• Carry out credit reassessment on your customers from time to time to establish the status of their business at any given time.
• Ensure that credit instruments, such as bank guarantees, are up to date.

In conclusion, it is only morally and ethically right for you as a lender or supplier, to protect your customers from the choppy commercial seas by first showing them how to swim in a pond of sensible financial planning.
In the event that a key customer gets into financial problems, your business is likely to be adversely affected as well.

Posted in Uncategorized | Tagged , , , , | Leave a comment

COST OF CREDIT TO AN ORGANIZATION/BUSINESS

Do you know that by extending goods and services to clients on credit can cause your organization dearly if not properly managed?  Credit can kill or make your company and it is therefore important to manage it if your organization objective is to maximize on profits gained from sales.

Maximizing profitability being one of the key objectives of any business, it is important that all activities be geared towards achieving this objective. Failure to manage the cost of credit will work negatively in achieving profitability in an organization and can lead to collapse of otherwise profitable venture.

The reason behind extension of credit to customers is to maximize sales and in return earn more profits; failure to manage the receivables may result to bad debt and tied-up capital. Determining the cost of credit and factoring it in the price can help in profit maximization. The cost of credit is made up of three broad elements;

  1. 1.      Bad Debt cost

Not all your credit sales will be paid for and you will find some clients not honoring their obligation due to various reasons, despite of your efforts to recover from them. This will call for a provision for bad debts and even a write-off. The best thing for a company to do is to ensure that vetting is done properly before extending credit to customers in order to minimize this cost. Don’t just extend credit to any client before evaluation of their capacity and ability.

  1. 2.      Cost of Invested Fund

Most businesses run on borrowed funds to finance their operation which include extension of credit sales to customers. The funds don’t come without a cost and you are required to payback the loan with an interest. The interest on loan or overdraft must be considered when extending goods and services on credit and must be added to the price. Most companies don’t apportion interest incurred to their credit sales yet that is where most of the funds are tied-up. Opportunity cost is also incurred when all your monies are with the debtors, meaning that you cannot seize opportunities that may come your way due to lack of cash at hand. Debtors tie working capital which could be used to generate more profits if invested in other opportunities.

3.      Administrative Cost

These include costs incurred in form of salaries, collection activities and any other  expense by accounts receivables. The costs must be factored when determining the cost  of credit in an organization; the activities may include telephone calls, demand letters,  personal visits and time spent in pursuing debtors.

To realize profitability by any organization that sells on credit, good credit management must be in place; otherwise the company may suffer or even go under-receivership as a result of bad debts. Be proactive in managing your debtor’s book if you want to reap the benefits of increased sales, resulting from extending credit.

Posted in Uncategorized | Leave a comment