Credit Policy

In: Business and Management

Submitted By vinittaamenon
Words 1187
Pages 5
Section I: Goals and Responsibilities
Step 1 - Mission Statement of the Credit Function
Definition

The mission statement is the statement of purpose. What is your department trying to accomplish? The mission is not a statement of your goals. Your goals are put into place to support the mission. The mission statement describes in what ways you are supporting or interacting in the overall company's mission. It defines your role in the unified vision.
Illustration

A Company with high margins and an aggressive sales growth target may have a mission statement like this: The mission of the Gorman Inc. credit department is to facilitate an annualized 20% growth in top line performance by assisting in the sales process. The credit department's role is to develop strong customer relationships by granting aggressive but appropriate credit limits and terms, easing the establishment of new accounts by processing applications quickly while protecting the margins by managing risk of loss represented by fraud, failure or severe delinquency
Developing a Mission Statement

Before a mission statement can be adequately defined, a general understanding of the environment or market in which your company operates must be obtained. In developing the mission statement, there needs to be a basic understanding of the following: A) B) C) D) E) F) Nature of the Marketplace Competition Location of your Customers Growth Plans Margins Internal Company Structure

Exploring these areas will ensure that your credit department's mission statement is directly in line with the marketplace and your company's overall mission statement.

Step 2 - Goals of the Credit Department
Definition

Now that you have identified the key components of your mission statement, you can set your specific goals. Your goals are put into place to support the mission statement. In order to be effective your…...

Similar Documents

Credit Policy

...Chapter 8: Personality 8.1 Meaning: Personality, Latin word “persona” literally means “a mask”. Personality refers to the characteristic patterns of behaviour and modes of thinking that determine a person’s adjustment to the environment. A good personality is often as synonymous to one’s charming appearance, healthy build up, pleasing behaviour patterns, good character, fine temperament (blend of nature, character, spirit, outlook etc), and so on. Hence a complete description of an individual’s personality would include many factors like intellectual abilities, motives acquired in the process of growing up, emotional reactivity, attitudes, beliefs, and moral values. In a nutshell, personality is the combination of physical and mental qualities, ideas, aspirations, ambitions, and interest that characterize a person. 8.2 Nature and Characteristics of Personality 2 Nature of Personality 1. Personality is something unique and specific. No two individuals, not even the twins, behave exactly the same way over any period of time. 2. Personality includes everything about a person. It includes all the behaviour patterns like conative, cognitive and affective activities. Besides, it includes his/her semi-conscious and unconscious behaviour. 3. Personality is organization of some psychophysical systems or some behaviour characteristics and functions as a unified whole. 4. Personality is dynamic since every individual has to struggle against his......

Words: 1671 - Pages: 7

Store Credit Policy

...Store Credit Policy Dear value customers, We are so happy that we can offer services and products for all our customers, and we hope these services and products can make our customers happy. One of our store polices is our merchandises are not refundable and returnable, but exchangeable if the merchandises have some problems because of merchandises themselves, or our unskillful assembling and packages within 7 days after we ship and delivery it, but not including other problems that caused by our customers or third parties. We would like to offer the same value of store credits for our customers who would like to, and our customers can get the same value products from our store before it expired. Please inform these clauses of our store credit policy: 1. We ONLY offer store credits for the customers who want to cancel the orders that we have ordered from the manufactures, or before we ship or deliver to customers. 2. Our customers have the same value as they have paid for on their store credits, and there is NO EXTRA FEE apply on it. 3. All store credits will not cashable or be other forms of credits, services and merchandises, including other merchandises that we cannot offer. We only response for the merchandises within our store. 4. This store credits only apply to the customers who paid for it, and the deliver address should be the same as the first order. If our customers want the new order that ships to the other addresses, we may charge extra......

Words: 335 - Pages: 2

Credit Policy of Ghana Commercial Bank

...Credit Policy of Ghana Commercial Bank THE CREDIT POLICY The credit policy of Ghana Commercial Bank Ltd is aimed at maintaining acceptable credit standards by holding reasonable risk limits, evaluating new business opportunities, complying with regulatory requirements and providing adequate liquidity for the effective running of the bank. This aim is achieved through the following objectives: 1. Attract and maintain a High Quality Portfolio of Assets 2. Efficiently manage its assets to ensure liquidity 3. Finance the needs of Corporate, medium and small scale as well as individual clients. 4. Join syndicates with other banks and financial institutions. The importance of these objectives is to ensure that clients who borrow from the bank have the ability to repay the funds they borrow on schedule and with interest. Businesses that borrow from the bank should demonstrate an ability to repay from their current and future net cash flows of the business. Individual client's repayments depend also on their personal cash inflows basically being their salaries. Another importance is the need to avoid bad debt as much as possible by not giving credit to clients who are likely to be unable to repay due to their peculiar circumstances. Also the bank must ensure that at all times it is able to meet its obligations to depositors since its stock in trade is money. This it does by diversifying loans it has given (assets) to have a wide array of maturity profiles. Also it......

Words: 324 - Pages: 2

Rbi with Special Reference to Credit Control Policy

...The Reserve Bnak Of India With Specific Reference To Credit Control Policy The Reserve Bank of India (RBI) is India's central banking institution, which controls the monetary policyof the Indian rupee. It was established on 1 April 1935 during the British Raj in accordance with the provisions of the Reserve Bank of India Act, 1934.[4] The share capital was divided into shares of 100 each fully paid, which were initially owned entirely by private shareholders.[5] Following India's independence in 1947, the RBI was nationalised in the year 1949. Structure Structure of RBI The organization of RBI can be divided into three parts:  1) Central Board of Directors. 2) Local Boards  3) Offices of RBI 1.Central Board of Directors :  The organization and management of RBI is vested on the Central Board of Directors. It is responsible for the management of RBI.Central Board of Directors consist of 20 members. It is constituted as follows.  a)One Governor: it is the highest authority of RBI. He is appointed by the Government of India for a term of 5 years. He can be re-appointed for another term.  b)Four Deputy Governors: Four deputy Governors are nominated by Central Govt. for a term of 5 years c)Fifteen Directors :Other fifteen members of the Central Board are appointed by the Central Government. Out of these , four directors,one each from the four local Boards are nominated by the Government separately by the Central Government. Ten directors nominated by the Central......

Words: 1850 - Pages: 8

Credit Policy of Ghana Commercial Bank

...THE CREDIT POLICY The credit policy of Ghana Commercial Bank Ltd is aimed at maintaining acceptable credit standards by holding reasonable risk limits, evaluating new business opportunities, complying with regulatory requirements and providing adequate liquidity for the effective running of the bank. This aim is achieved through the following objectives: 1. Attract and maintain a High Quality Portfolio of Assets 2. Efficiently manage its assets to ensure liquidity 3. Finance the needs of Corporate, medium and small scale as well as individual clients. 4. Join syndicates with other banks and financial institutions. The importance of these objectives is to ensure that clients who borrow from the bank have the ability to repay the funds they borrow on schedule and with interest. Businesses that borrow from the bank should demonstrate an ability to repay from their current and future net cash flows of the business. Individual client's repayments depend also on their personal cash inflows basically being their salaries. Another importance is the need to avoid bad debt as much as possible by not giving credit to clients who are likely to be unable to repay due to their peculiar circumstances. Also the bank must ensure that at all times it is able to meet its obligations to depositors since its stock in trade is money. This it does by diversifying loans it has given (assets) to have a wide array of maturity profiles. Also it ensures that its assets are properly......

Words: 3607 - Pages: 15

Credit Mangement Policy by Bangladesh Bank and Its Implementation by Bank Asia Limited

...representatives from the Bangladesh Bank as team coordinators to look into the practices of the best performing banks both at home and abroad. These focus groups identified and selected five core risk areas and produced a document that would be a basic risk management model for each of the five 'core' risk areas of banking. The five core risk areas are as follows- a) Credit Risks; b) Asset & Liability / Balance Sheet Risks; c) Foreign Exchange Risks; d) Internal Control & Compliance Risks; and e) Money Laundering Risks. Bangladesh Bank in one of it’s circular (BRPD Circular no.17) advised the commercial banks of Bangladesh to put in place an effective credit approval and monitoring system by December, 2003 based on the guidelines sent to them. In my study, I would try to put forward my findings about the “Credit Management Policy of Bangladesh Bank, and its implementation”. To illustrate my point, I am giving the example of Bank Asia Limited. 2. Objectives of the study. Broad objective: ❖ The broad objective is to know the Credit Management Policy of Bangladesh Bank. ❖ To analyze its implementation at Bank Asia Limited. Specific objective: In order to reach the broad objective, some specific objectives are identified.In this report, I have attempted to give an overview of foreign exchange operation of BAL. Following are the main objective: ❖ To familiarize with the history......

Words: 20562 - Pages: 83

Financial Intermediation and Credit Policy in Business Cycles

...Financial Intermediation and Credit Policy in Business Cycle Analysis∗ 1 Introduction To motivate interest in a paper on financial factors in business fluctuations it use to be necessary to appeal either to the Great Depression or to the experiences of many emerging market economies. This is no longer necessary. Over the past few years the United States and much of the industrialized world have experienced the worst financial crisis of the post-war. The global recession that has followed also appears to have been the most severe of this era. At the time of this writing there is evidence that the financial sector has stabilized and the real economy has stopped contracting and output growth has resumed. The path to full recovery, however, remains highly uncertain. The timing of recent events, though, poses a challenge for writing a Handbook chapter on credit market frictions and aggregate economic activity. It is true that over the last several decades there has been a robust literature in this area. Bernanke, Gertler and Gilchrist (BGG, 1999) surveyed much of the earlier work a decade ago in the Handbook of Macroeconomics. Since the time of that survey, the literature has continued to grow. While much of this work is relevant to the current situation, this literature obviously did not anticipate all the key empirical phenomena that have played out during the current crisis. A new literature that builds on the earlier work is rapidly cropping up to......

Words: 10599 - Pages: 43

Credit Policies

...Corporate Credit Card Policy: • This Policy applies to all employees of the Agency who are assigned a Corporate Credit Card. • Conditions set out in this Policy, the relevant Cardholders’ Responsibility statement issued by the Bank govern the use of any Corporate Credit Card. • This Agency uses BB&T Visa Corporate Card. • Cardholders and their supervisors are responsible for ensuring that they adhere to the Corporate Credit Card policy, thereby ensuring adequate controls are exercised to minimize the risk that Corporate Credit Cards are used for fraudulent or corrupt purposes. Cardholders and their supervisors are referred to the Vice President of Finance for further information on their role in relation to fraud and corruption prevention. Eligibility • Permanent and temporary officers of Agency can apply for a Corporate Credit Card • Employees are eligible to be issued with only one (1) Corporate Credit Card. • To be eligible for a Corporate Credit Card, an employee must meet one or more of the following criteria: * travel frequently in the course of his/her duties or * purchase significant volumes of minor goods and services for use by the Agency or * incur regular frequent expenses of a kind appropriately paid by credit card Limits • Each Card will be limited to a maximum set by the Vice President of Finance, who will determine the limit on a basis of need and your cost center’s budget(s), and be for business......

Words: 1070 - Pages: 5

Customers Perception Regarding Credit Appraisal Policies of Selected Bank

...A RESEARCH PROPOSAL ON “CUSTOMERS’ PERCEPTION RELATED TO CREDIT APPRAISAL POLICIES AND PRACTICES OF SELECTED BANK LOANS IN U.T. OF DADRA AND NAGAR HAVELI’’ Submitted to Post Graduate Department of Business Studies Sardar Patel University VallabhVidyanagar Submitted by Dipankar Prajapati Asst. Professor at SSR College of ACS, Silvassa U.T. of Dadra and Nagar Haveli. INTRODUCTION__________________________________________________ BANKING SYSTEM IN INDIA Banking is believed to have existed in the most crude form in India, as early as Vedic period. Money lending was common practice in India, with the ancient people. The Puranas and Smritis mention about money changing and money lending. Manusmriti contains reference regarding deposits, pledges, policy on loans and rates of interest. Kautiliya’s Arthashastra also speaks extensively on banking practices in ancient India. The banking system of a country occupies a pivotal role in functioning and development of a country’s economy. In fact, it lies at the core of money market and also plays a complementary role in supporting the capital market. It is necessary to remember that the structure of the banking and financial system of any country is neither created at one stroke, nor is it permanent for all times to come. The fact of the matter is that various institution get evolved over a period of time, either through the trial and error method adopted by the people or at the instance of government. ...

Words: 1961 - Pages: 8

France vs Uk Policy Changes Post Credit Crunch

...Effects of credit crunch/policy within the last ten years on political economy decisions in two countries: the UK and France. Introduction: The UK and France are two leading Western European countries having the fifth ($2.9 trillion) and sixth ($2.8 trillion) largest economies respectively. They are both apart of the European Union in which France was a founding member with the UK later joining in 1973. It presently gives them the opportunity to have a single market with all twenty-eight-member states. But their similarities do not stop there with both countries sharing similar statistics in population (UK – 64.1m, France – 66.3m) as well as a similar labour force of around 30 million. However, there are several major differences between the two countries including the currencies they use; France adopted the euro in 1999 whilst the UK opted out of the Maastricht Treaty retaining the British Pound. But the most interesting difference is the way each country handles their economic policy in such contrasting fashion. This paper looks to show which policies were implemented by each government and the economic theories behind them. Political Economy Comparison: 1) State Ownership UK * The David Cameron administration since 2010 has been fast to privatise and sell off state owned companies. They have recently given an IPO to Royal Mail and are keen to sell other assets including its equity in URENCO. Furthermore, from early January ‘under a new Treasury scheme,......

Words: 1883 - Pages: 8

Credit

...Ian W Marsh The effect of lenders' credit risk transfer activities on borrowing firms' equity returns Bank of Finland Research Discussion Papers 31 • 2006 Suomen Pankki Bank of Finland P.O.Box 160 FI-00101 HELSINKI Finland + 358 10 8311 http://www.bof.fi Bank of Finland Research Discussion Papers 31 • 2006 Ian W Marsh* The effect of lenders’ credit risk transfer activities on borrowing firms’ equity returns The views expressed are those of the author and do not necessarily reflect the views of the Bank of Finland. * Cass Business School, London, and Bank of Finland. E-mail: i.marsh@city.ac.uk. This paper was written while the author was visiting the Research Unit of the Bank of Finland. The Bank’s hospitality was exemplary and I am grateful to participants at the Research Unit’s Summer Workshop, the Bank of Finland Economics Seminar, Iftekhar Hasan, Tuomas Takalo, and Wolf Wagner for comments. Susan Yuska at the Chicago Fed was very helpful in guiding me through the Bank Holding Company Database. http://www.bof.fi ISBN 978-952-462-340-7 ISSN 0785-3572 (print) ISBN 978-952-462-341-4 ISSN 1456-6184 (online) Helsinki 2006 The effect of lenders’ credit risk transfer activities on borrowing firms’ equity returns Bank of Finland Research Discussion Papers 31/2006 Ian W Marsh Monetary Policy and Research Department Abstract Although innovative credit risk transfer techniques help to allocate risk more optimally,...

Words: 9763 - Pages: 40

Aaa Hr Policy Englis-Tr Credit Hours

...ENG202: EngliS-tr Credit Hours 3 Credit Hours 3 Credit Hours 3 Credit Hours 3 Credit Hours 3 Credit Hours 15 Credit llours 3 Credit Hours MGT 202: Human Resource Management ECO 202: Macro Economics 3 Credit Hours MTH 202: Business Mathe,mdics tr 3 Credit Hours U C 202:. Introductory Database 3 Credit Hours Third Semester 15 ENG 203: Business Communication 3 Credit Hours STT 201: Statistics 3 Credit Hours ACC 201: Financial Accounting 3 Credit Hours FIN 201: Business Finance t"t 3 Credit Hours 3 Credit Hours ITC 203: Management Information System 3 Credit Hours Fourth Semester 15 MGT 204: Business Law. 3 Credit Hours MGT 206: Business Environment in Nepal 3 Credit Hours ACC 202: Cost and Management Accounting 3 Credit Hours PSY 201: Psychology 3 Credit Hours MTT 201: Fundamentals of Marketing 3 Credit Hours Credit Hours Credit Hours Fifth Semester MGT 207: International Business 3 Credit Hours MGT 205: Operations Management f 3 Credit Hours FIN 202: Basic Financial lVlanagement ty 15 3 Credit Hours SOC 201 : Sociolory for Business 3 Credit Hours ACC 203 : Corporate Taxation in Nepal 3 Credit Hours Sixth Semester 15 RCH 201: Business Research M€thods 3 Credit Hours MGT 203: Organizational Behavior 3 Credit Hours SOC 202: Nepalese Society and Politics 3 Credit Hours MGT 3 Credit......

Words: 344 - Pages: 2

Fin 200 Credit Policy Decisions

...200 Annual Incremental Revenue…………………………………….. 72,800 Collection Costs (5% of New Sales)…………………………….. 4,000 Production and Collection Costs (78% of New Sales)………… 62,400 Annual Income Before Taxes……………………………………. 6,400 Taxes………………………………………………………………. 1,920 Annual Incremental Income After Taxes……………………….. $ 4,480 c. Yes, I believe that Collins should liberalize credit if a 15 percent after-tax return on investment was required because the above calculations show a 28% return on investments (profit). d. The total incremental investment in accounts receivable and inventory to support an $80,000 increase in sales would be: $80,000 / 4 = $20,000. So the answer would be $20,000. e. Let’s add the $16,000 from a/r to the $20,000 in inventory. If so then we would get $36,000. Next we’ll take $4,480 (incremental income after taxes) divided by the $36,000 incremental investment giving us a 12.44% return on investment. If this were the information we were to consider than Collins should NOT extend more liberal credit terms because 12.44% is less than a 15% return on investment or ROI as required....

Words: 251 - Pages: 2

Setting Up Credit Control Policy

...Setting Up a Credit Control System Mismanagement of cash flow is the single biggest reason that small businesses go under. Therefore, a good credit control system is an essential part of any business' accounting procedures. Maintaining consistent cash flow, avoiding bad debt and minimising late payments are essential for survival. Use the following checklist to set up a system. Things to do 1. Set up a detailed credit control system It must allow you to identify invoices that have been raised, sent to customers or paid. You must also be able to see which invoices need chasing up. Each customer must have a file with details such as: business name; business address; postal address for invoices; and a contact name and number for invoice enquiries. Train several people on the system and test it thoroughly. 2. Credit-check your customers To do this, you can approach their bank for a reference; use a credit reference agency; or ask their other suppliers. Establish how solvent the customer is and whether they are likely to have any problems paying their invoices on time. 3. Decide on your general payment terms Most importantly, decide on a payment date. Bear in mind that new customers should only be given a short time in which to pay. Go through the terms with each customer and print them clearly on each invoice. 4. Send invoices promptly Try to send all of them out the same day as goods are sent or delivered. Make sure the invoice is sent to the correctly named and...

Words: 590 - Pages: 3

Credit

...RESEARCH METHODOLOGY Introduction to Credit Appraisal: Credit appraisal means an investigation/assessment done by the bank prior before providing any loans & advances/project finance & also checks the commercial, financial & technical viability of the project proposed its funding pattern & further checks the primary & collateral security cover available for recovery of such funds. Problem Statement: To study the Credit Appraisal System in SME sector, at State Bank of India (SBI), Uttarsanda. Objectives: * To study the Credit Appraisal Methods. * To understand the commercial, financial & technical viability of the project proposed & it’s funding pattern. * To understand the pattern for primary & collateral security cover available for recovery of such funds. Research Design: Analytical in nature Data Collection: Primary Data: * Informal interviews with Branch Manager and other staff members at SBI bank. * E-circulars of SBI Secondary Data: * Books and magazines * Database at SBI * Internal reports of the banks * Library research * Websites Expected contribution of the study: This study will help in understanding the credit appraisal system at SBI & to understand how to reduce various risk parameters, which are broadly categorized into financial risk, business risk, industrial risk & management risk associated in providing any loans or advances......

Words: 28662 - Pages: 115