Amy Rose F.

Abalunan
BA206 Financial Management Prof. Vincent Ray Boron

Credit and inventory management

Inventory management refers to the process of ordering, storing, and using a

company's inventory. These include the management of raw materials, components,
and finished products, as well as warehousing and processing such items.

For companies with complex supply chains and manufacturing processes, balancing the
risks of inventory gluts and shortages is especially difficult. To achieve these balances,
firms have developed two major methods for inventory management: just-in-time and
materials requirement planning: just-in-time (JIT) and materials requirement planning
(MRP).

Credit management is the process of granting credit, setting the terms it's granted on,
recovering this credit when it's due, and ensuring compliance with company credit
policy, among other credit related functions. The goal within a bank or company in
controlling credit is to improve revenues and profit by facilitating sales and reducing
financial risks.
A credit manager is a person employed by an organization to manage the credit
department and make decisions concerning credit limits, acceptable levels of risk, terms
of payment and enforcement actions with their customers. This function is often
combined with Accounts Receivable and Collections into one department of a company.
The role of credit manager is variable in its scope and Credit managers are responsible
for:[1]

 Controlling bad debt exposure and expenses, through the direct management of
credit terms on the company's ledgers.
 Maintaining strong cash flows through efficient collections. The efficiency of cash
flow is measured using various methods, most common of which is Days Sales
Outstanding (DSO).
 Ensuring an adequate Allowance for Doubtful Accounts is kept by the company.
 Monitoring the Accounts Receivable portfolio for trends and warning signs.
 Hiring and firing of credit analysts, accounts receivable and collections
personnel.
 Enforcing the "stop list" of supply of goods and services to customers.
 Removing bad debts from the ledger (Bad Debt Write-Offs).
 Setting credit limits.
 Setting credit terms beyond those within credit analysts' authority.
 Setting credit rating criteria.
 Setting and ensuring compliance with a corporate credit policy.
 Pursuing legal remedies for non-payers.
 Obtaining security interests where necessary. Common examples of this could
be PPSA's, letters of credit or personal guarantees.
 Initiating legal or other recovery actions against customers who are delinquent.

https://en.wikipedia.org/wiki/Credit_management

https://en.wikipedia.org/wiki/Inventory