Credit and Collection

Pre-final examination
BERNADETTE SAGAD PANGAN
BAFM 31
Test I. Provide explanation to the following:
1. Three common problems of credit industry. (3 pts each)
1) Lack of enough credit history
When you do not have enough record of lending money from creditors. They
would not be sure if you can be trusted or not.
2) Denied credit application
When you’re applying for a loan but got denied or rejected.
3) Fraud and identity theft
Using someone else’s identity or information for borrowing money which
are criminal acts.
2. Give your insights why credit policies are important for credit industry. (5 pts)
Credit policies are important because it will keep the clients liable. Credit
Policy contains guidelines that the company and clients should follow so both
parties would not take advantage. Credit policies detail the company's credit
qualifications, limits and terms, and invoice and debt collection terms.
3. State one right of the seller and explain. (5 pts)
Right against the buyer
- The seller can sue the buyer if they did not pay before the deadline or did
not pay the exact amount. To hold the buyer liable or accountable. The buyer
should also pay the interests if they did not pay on time.
4. What is an invoice and state some of its uses? (5 pts)
Invoice is a bill sent by the lender to their clients. Invoice include the exact
amount of money you have to pay. It also includes the due date or deadline of the
money you lend so you can pay in time to not cause problems.
5. What is your understanding of a credit procedure? (5 pts)
- It is the guidelines that the company and the clients should follow. It is the
terms and conditions in lending money. The steps in collecting and paying. The
company makes its own terms and condition and if the cklients accept it. The
detailed steps in collecting.
6. What do you think the importance of setting up a collection management
system? (5 pts)
- It is important because it will stop the company or clients in taking
advantage. To meet the needs of the company and the client. To ensure safety. The
function of granting credit terms and making sure money is collected when it
becomes due. It helps to monitor and collect payments from clients.
7. What are the steps in setting up collection management system? Explain. (3 pts)
1) Capture information about customer accounts
- Collect information about your clients and how much money they
owe or need to pay. Criteria for accepting or rejecting a client.
2) Learn the laws with relating to collection
- You should know the laws that can protect the creditors and the
debtors. Ex. What will happen to client if they did not pay on time.
3) Decide if you need to check credit
- Considering if you want to evaluate the clients. Checking the clients
history if they have other borrowed money. You should have a criteria in
accepting or rejecting clients under the credit laws.
4) Make a plan for invoicing and reminders
- Send bills or invoices frequently so the clients will be reminded
regularly so they will not pass the due dates. Sending bills regularly keeps
the cash flow.
5) Determine how you would deal with non payments
- Make a strategy for dealing with clients who do not pay. Try to
remind them at first about it in case they forgot, if they did not respond try to
set another alternatives or deadline for their payments.
6) Make a plan for turning non payees over to an outside source
- Take your collection to an outside collector. This happens if the
client no longer has plan to pay. Outside people will try to handle it like
taking the to court and hiring a collection attorney.
8. Describe the billing process of a credit company. (5 pts)
Process or procedure of the company. How the company send invoice to
clients to remind them. How they collect money or how they accept payments.
Step by step process in collecting.