Northrise University

Caravelle House, Buteko Avenue, Ndola

ASSIGNMENT COVER SHEET

Student ID: 1905432

Student Name: Ifrah Ahmed

Course Code: FIN201

Course Title: Business Credit Management

Instructor Name: Mrs. Jessie Chongo Mwewa

Essay/Assignment Title: BENEFITS OF AN EFFECTIVE CREDIT MANAGEMENT
SYSTEM ON RECEIVABLES

Due Date: 2nd March, 2020

Declaration:
I understand that by completing this form I am bound by the following:
To the best of my knowledge and belief no part of this assignment for the above subject has been copied from
any other student’s work or from any other source except where due acknowledgement is made in the text, or
has been written for me by another person except where such collaboration has been authorized by the lecturer
concerned.
ifrah
SIGNATURE

Instructor’s Comments:

GRADE [ ]
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BENEFITS OF AN EFFECTIVE CREDIT MANAGEMENT ON RECEIVABLES

The credit management function includes all of the business activities in ensuring the customers

pay within the terms and conditions agreed upon. An effective credit management system prevents

delays in payment, bad debts, frequently monitoring the customers to prevent credit risks (e.g.

reminding them about the payments before the deadline) strengthening customer relations, etc. The

way a business carries out their credit management is what may sometimes result in delayed or bad

debts. A business with an effective credit management will conduct better customer services. All

customers recognize the fact that they owe you and it is the duty of an entity to collect its money.

An effective credit management system increases good customer communication. Chen and

Wang (2009) suggest considering the customers experience, beliefs, personal characteristics and

sometimes empathizing with the customer when debt collecting can strengthen the relation between the

entity and the customer resulting in the customer getting attracted to and favoring the entity more. The

study of customer lifestyle is the gateway to success in the market.

An entity’s consistency on their good customer service performance will earn them trusted and

satisfied customers. Customer satisfaction comes about when the customer’s needs are met e.g. when

their inquiries are met well, when their complaints are attended to and taken action upon (issues with

the invoice), when they receive a correct invoice, reminded about the due date in advance, when they

are followed up on how the debt is coming together, etc. Customer satisfaction predicts future customer

behavior (Hill, Roche and Allen 2007).

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BENEFITS OF AN EFFECTIVE CREDIT MANAGEMENT ON RECEIVABLES

Customer loyalty comes about when the customer becomes dependent and committed on the

entity. Thomas and Tobe (2013) emphasize that loyalty is more profitable. The expense to gain new

customers is more than retaining an existing one. A loyal customer encourages others to buy from you

and is difficult for them to do business with another entity. Customer loyalty is gained through design

decisions and planning. Customer centered approaches that recognize the interests of customers are

carried out. Customer loyalty is built overtime across many procedures.

When a customer becomes loyal, he/she will frequently do business with the entity. Therefore,

meeting the customer’s needs and at the same time improving the entity’s profit, cashflow and making

it difficult for other entities to compete with.

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BENEFITS OF AN EFFECTIVE CREDIT MANAGEMENT ON RECEIVABLES

References

Chen, M. F. and Wang, L. H. 2009. The moderating role of switching barriers on customer loyalty in

the life insurance industry. The Service Industries Journal, volume 29, pp. 1105-1123.

Hill, N., Roche, G. and Allen, R. 2007. Customer satisfaction: The customer experience through the

customer’s eyes. London: Congent Publishing Ltd.

Thomas, B. and Tobe, J. 2013. Anticipate: Knowing What Customers Need Before They Do.

http://site.ebrary.com/lib/samk/home.action. Accessed 6 August 2017S