NAME: AHMED OMAR

REG NO: BBM/2019/44691

UNIT: CREDIT MANAGEMENT

TASK: INDIVIDUAL ASSIGNMENT

LECTURER: MRS. CAROLINE WAIRIMU

DATE: 23RD NOVEMBER, 2022

 i. Describe reasons why the cash conversion cycle varies from one industry to
another.
The cash conversion cycle (CCC) is a metric that expresses the time (measured in days) that it
takes for a company to convert its investments in inventory and other resources into cash flows
from sales. The CCC is one of several quantitative measures that help evaluate the efficiency of a
company’s operations and management. A trend of decreasing or steady CCC values over
multiple periods is a good sign, while rising ones should lead to more investigation and analysis
based on other factors. One should bear in mind that CCC applies only to select sectors
dependent on inventory management and related operations. CCC will differ by industry sector
based on the nature of business operations. CCC differs between industries due their nature but
also it depends on the way each company manages each variable that contributes to it: payments
to suppliers, inventories, receivables and sales. Not only have these factors varied with the nature
and the management of each industry in specific, but also with the state of the economy. Another
aspect is that also companies with many exports and imports to countries with different
currencies can face differences in CCC due to gains or losses in exchange rates.
ii. Discuss ways in which the credit department can utilize to encourage timely payment of
debts.
1. Prepare a written payment agreement
It’s essential that there’s a written agreement that summarizes the exact payment terms,
deadlines, and other important payment details. Discuss it together to ensure there will be no
misunderstandings in the future.
2. Have stricter payment terms
Offering flexible payment terms is a smart move if the credit department wants to keep the
customers happy and guarantee that paying is always convenient for them. There are some
customers who are too stubborn and disorganized and will choose to not pay you on time no
matter have flexible your terms are.
3. Follow a regular payment schedule that works for the customers
The credit department needs to tighten up the payment schedule. For instance, to send invoices
during the 1st and 15th of each month, make sure to stick to a schedule of sending invoices on
those dates.
4. Ask for an upfront payment or deposit
This works best for new customers or those with very large orders. Request that they pay half of
the bill upon placing their orders and the other half upon delivery of the products.
5. Provide different payment methods
It’s important that the credit department offers customers a convenient payment method so they
can still settle their invoices on time despite their tight schedules.
6. Send payment reminders regularly
It’s perfectly okay and accepted to send friendly reminders to the customers and asking them
about payments. And not just the late or overdue payments, you can send a reminder that the
deadline is coming up. Make use of technology to set this up automatically so your customers are
getting chased up in the background. An automated reminder from an invoice system also feels
less pushy and personal and more like a regular, helpful bit of admin and they are very effective
at getting payments in.
7. Adopt an ordering and payments platform
Dedicated ordering platforms don't just let the credit department accept retail orders and manage
them from a single dashboard; they also help you get paid on time.
8. Reward the customers who pay on time
One of the most effective ways to get customers to pay on time is to offer them incentives. The
credit department may choose to give them gift certificates as rewards or small product discounts
if you receive their payments a before the invoice due date. Just make sure your incentive will
excite your customers enough for them to make their payments on time. 
9. Implement a late payment fee
Unfortunately, no matter how big the prompt payment incentive is, there will still be customers
who won’t settle their invoices on time. Charge them late payment fees. An additional cost of
around 1.5% to 2% for paying late might be enough to get their attention and encourage them to
pay on time. Incentives for early payments and fees for late ones work really well together to
train your customers into paying on time. 
10. Review your invoices regularly
By this, it means monitoring and tracking all the invoices to identify which customers have or
haven’t paid yet. It can be done manually, or if you’re too bogged down with admin tasks, the
credit department can adopt a digital tool to help out.