CREDIT

MANAGEMENT
 THE CREDIT EXECUTIVE

The credit executive of today is the result of a
business need as well as business experience.
For as business has developments along
administrative efficiency and productive
capacity, the credit executive is now a
specialist, an analyst who guides the destiny
of the majority of day-to-day transactions in
trade.
 QUALIFICATIONS OF A
CREDIT MAN

To be a credit man either from the
lowest rung of the ladder to that of a
position of prominence is no easy
task. And to borrow a time-honored
saying:
“Many are called but few are chosen.”
To be qualified, therefore, for credit work is to have
the necessary background both in personal qualities
and educational preparation.


I. PERSONAL QUALIFICATIONS OF A
CREDIT MAN- A credit man must possess
an number of personal qualifications in
order to succeed in this field of endeavor:
1. ADAPTABILITY
2. TACTFULNESS
3. ANALYTICAL ABILITY
4. DECISIVENESS
5. FIRMNESS
 1. ADAPTABILITY

The credit man will be faced
with different problems, such
as those who possess the
willingness but cannot pay and
those who have the capacity
but lack the willingness.
 2. TACTFULNESS

Courtesy tempered with sound
judgment is tactfulness. This is not
inborn but a developed trait. One must
be able to listen patiently to details, try
to appreciate another’s point of view,
and place himself in another’s shoes,
especially in probing into their personal
and business affairs.
 3. ANALYTICAL ABALITY

A credit man, whether an investigator
or analyst, is faced with situations
requiring a quick and analytical mind.
In asking questions, the young
investigator must take mental note of
the series of answers to be able to get
the most out of an interview.
 4. DECISIVENESS

The applicant must get either a
YES or NO answer. The moment of
indecision cannot last forever for a
credit man. He must let the “chips
fall where they may” and give his
verdict one way or other.
 5. FIRMNESS

When a decision is made, the
credit man must stand his
ground with reasons. Thus his
decision must be made
judiciously though decisively.
 OTHER PERSONAL
QUALIFICATIONS

In the words of the Bible, a credit
man should also have the patience
of Job, the wisdom of Solomon, the
courage of David, and the
prophetic sense of John.
Furthermore, he should be honest,
fair, cooperative, and congenial.
 
II. EDUCATIONAL QUALIFICATION OF CREDIT
MAN- While it is true that things may be learned
“on the job”, the business executive or credit man
can attain this trough scientific training.

1. ACCOUNTING
2. ECONOMICS
3. FINANCE
4. BUSINESS LAW
5. MARKETING
6.OTHER EDUCATIONAL KNOWLEDGE
 1. ACCOUNTING

Accounting is the recording,
interpreting, and analyzing of
financial records. It is all too apparent
that a credit man should have
knowledge of this branch of learning
to be able to read, interpret, and
analyze financial statements.
 2. ECONOMICS

To appreciate the movements in
the business activity, one must be
acquainted with basic economics,
at least. External factors which are
economic in nature may affect the
credit risk and cause delay in
payments.
 3. FINANCE

The principles of credit and
collection are within the
province of finance. Hence, the
credit man must be equipped
with a good knowledge of
finance.
 4. BUSINESS LAW

Legislation related to business must
form part of the knowledge of the
credit man. Among others, the law
governing sales, the Negotiable
Instruments Law, the Anti-Usury Law,
the laws on Mortgages and Insurance,
the Corporation Law, and many others
are necessary in credit work.
 5. MARKETING

While marketing is a part of
economics, there are now new
methods, techniques, and practices
peculiar to marketing executives
which the credit man should
become aware of.
 6. OTHER EDUCATIONAL
KNOWLEDGE

An understanding of management
principles and practices is also
essential to the credit man. By having
such knowledge the credit man gets to
know his place in the managerial
structure and will therefore do his
part toward the attainment of desired
goals.
CREDIT MANAGEMENT

Objectives of the Credit Department

The goals of credit manager who leads

the credit department are
1. To maximize sales and
2. To minimize bad debts
This is in line with the general objective of
maximizing profits.
 
Policy Formulation
In order to formulate sound credit
policies, the credit man acquaint himself with
the internal operating policy of the firm, such
as its financial strength, margin of profit,
costs of production, and inventory levels.
 FUNCTIONS OF THE CREDIT
DEPARTMENT

 SUPERVISION OF THE CREDIT DEPARTMENT’S
OPERATION-Observe the foremost function of the
credit executive or manager to supervise the work within
the department.
 GATHERING CREDIT INFORMATION- credit
department gathers information about the credit from
direct or indirect.
 ANALYZING CREDIT INFRORMATION-All
information is sent to the credit analyst who is in charge
of applying the standard tests and measurements for
performance.
 
 CREDIT CHECKING AND
AUTHORIZATION- once the analysis is
undertaken verification is made of applicant’s
papers to the proper authorization.
 FILING AND RECORDING- The credit folder
of the applicant is prepared and filed.
 CREDIT ADJUSTMENTS- Adjustments are
made in accordance with discount or net credit
period, or both.
 
 COLLECTION CORRESPONDENCE- Credit granting
does not end with the approval of the application but
with its collection.

 OTHER FUNCTIONS-Other functions which may fall

within the jurisdiction of the credit department are the
exchange of credit information with the other
organizations.
 RELATIONSHIP OF CREDIT
DEPARTMENT WITH OTHER
DEPARTMENTS

 SALES DEPARTMENT- The credit department is
often at loggerheads with the sales department.
 PURCHASING DEPARTMENT- The purchasing
department sometimes seeks the assistance of the
credit department when it purchases supplies on
credit.
 PRODUCTION DEPARTMENT- To know the
production process, the credit department should
have good relations with the production department.