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Credit Risk Management: A Guide to Sound Business Decisions


How to decide when to say "yes" to a credit applicant-without jeopardizing your reputation or your company's bottom line Deciding whether a credit applicant is ultimately creditworthy involves more than just poring over their financial statements-it takes the kind of advice only an experienced credit expert, like Hal Schaeffer, can give. A 28-year veteran of the credit screening process, Schaeffer outlines the nuts-and-bolts of assessing a credit applicant's financial health and ability to make good on a line of credit. In part one's clear, four-part "A, B, C, D" format (A is for Analysis, B is for Building Essential Business Credit Information, C is for Considering All Factors,and D is for Decision), the author examines a prospective borrower from every angle, using formulas, checklists of what to look for, and available outside information sources (from Dun & Bradstreet to the Internet) to get a genuine picture of an applicant's current finances and degree of credit risk. Also outlined are the financial, credit, and business factors that go into a "sound business credit decision" a guideline for consolidating facts to vindicate your decision, as well as a series of twelve chapter-length case studies (contained in part two). Discussion includes:
* Determining the cost and accuracy of financial information
* Isolating information gaps in financial records
* The actual costs (including total/partial loss of sale, insurance fees) and value (including future sales to the customer) to your company if credit is extended
* The exact nature of the sale-large (or small); one-time deal or continuous; the expected profit margin
* The controls your company has over the customer
Complete with twelve chapter-length real-world case studies of problems typically encountered (with detailed solutions), Credit Risk Management offers practical, no-nonsense advice on how to minimize the risks-and maximize the benefits-to you and your company when you finally say "yes" to an applicant.

H. A. SCHAEFFER Jr., CCE, CEW, is President of D&H Credit Services, Inc., a credit and financial customer service consulting firm to all sizes of manufacturers, wholesalers, government agencies, and credit organizations located in Port Washington, N.Y. He has served as a credit consultant for a number of midsize companies as well as Fortune 500 companies, including Bausch & Lomb and Mobil, Inc. He has taught credit courses for the American Management Association (AMA), the National Association of Credit Management (NACM), and Dun & Bradstreet. He has also taught customized courses for Fortune 500 companies and noncredit organizations.

A Is for Analysis for Creative Credit Management.

B Is for Building Essential Business Credit Information.

C Is for Considering All Factors That Impact the Business Credit Decision.

D Is for Decision (or Recommendation).


Case Study 1: Sure Progress, Inc: Creative Alternatives to the Direct Extension of Credit.

Case Study 2: International Exports, Inc: Creative Methods to Reestablish Open Account Credit with a Former Problem Customer.

Case Study 3: Special Materials, Inc: Business Issues and Costs That Effect a Sound Business Credit Decision.

Case Study 4: Fast Action Suppliers, Inc: Preserving a Company's Reputation That is Tarnished by a Customer's Slow Paying Practices.

Case Study 5: True Delivery Seals, Inc: Minimizing Exposure to Loss Due to the Cancellation of a Distributor Contract.

Case Study 6: First Choice Company, Inc: Dealing with a Last-Minute Credit Decision.

Case Study 7: Perfect Image Suppliers, Inc: Addressing a Customer with an Overbearing Attitude.

Case Study 8: Basic Needs, Inc: Considering Increased Credit Limits for Existing Customers.

Case Study 9: Drugs "R" Us Products, Inc: Addressing a Customer's "Shady" Past.

Case Study 10: Freezy Refrigerator Repair Co: Addressing the Problems with the Sale of a Service.

Case Study 11: Terra Technology, Inc. The Risk of a Custom Order Sale.

Case Study 12: Compania Swift, Inc. The Sale of Goods to Foreign Customers.