QUESTION ONE

(a) Enumerate four ways a credit manager could utilize to encourage timely
payment of debt. (4 marks)

Accepting various payment methods. Expanding the methods which you accept
payment will eliminate barriers that may hinder earlier payment of debts.
Business processes that make transmitting money simple and secure, including as
PayPal payments, direct bank transfers, e-checks, and other options.

A good way to make sure you get paid on time is to keep up a good, trustworthy
connection with your customers. If your clients value you and the work you
provide, they'll probably pay you on time because they realize it will strengthen
your already good connection.

Have incentives in place to encourage early payments. Giving discounts for early
payment will increase the probability of clients paying on time and can also be
utilized as marketing strategy.

Ensure you have a contingency plan or a collection policy if all fails. As a last
resort reaching out to debt collection agencies or sending final demand letters may
help to ensure payment of debts.

(b) Explain three sources of public information used in customer credit assessment.
(6 marks)

Bank checking. Customers seeking trade credit can obtain information on banks'
commercial customers from their credit departments as a service. Banks can
provide critical information such as loan accommodation and experiences.

Financial statements. The issuer of credit may request financial statements for
credit analysis. The enables the issuer to asses a company’s financial position
and audited statements provide more accurate information.

Credit Ratings and Reports. A credit report contains; certain financial

information; and a trade check of suppliers, including the length of their
experience with the company and whether payments are discount, prompt, or
past due. This provides crucial information for credit analysis.