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Chapter 9
1.2 Establishing a credit policy
A company’s credit policy will be influenced by:
demand for products
competitors’ terms
risk of irrecoverable debts
financing costs
costs of credit control
A credit policy has four key aspects:
assess creditworthiness
– new customers immediately
– existing customers periodically
credit limits
– amount of credit
– length of time allowed before payment
invoice promptly and collect overdue debts
– to reduce risk of default
monitor the credit system
– aged receivable reports
– ratios
– statistical data
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