The Credit Protection Association plc

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CPA House
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Tel: 020 8846 0000
Fax: 020 8741 7459

Credit Management Health Check

 
 
 

These days, the granting of credit carries greater risks than in recent times.
The effects of bad debt write-offs can be devastating for any type of businesses, but particularly for S.M.E.s and start-ups. Yet prudent credit-granting can help expand sales enormously – so it really pays to ensure your credit management skills are in tiptop condition! Why not see how you fare with this CPA Credit management health check?


1. Do you have a dedicated credit department? If not, is there a specific person or people in your business responsible for assessing credit applications, monitoring existing customers and making collections?

Yes     No 

2. Do you both obtain a status report (speaking for the specific amount of credit applied for) from a reputable agency before granting credit and regularly monitor the credit worthiness of existing clients?

Yes     No 

3. Do you realise that if a business makes 5% net profit on its sales turnover, a loss of £1,000 in bad debts nullifies the net profit on £20,000 of sales?

Yes     No 

4. Do you also recognise that an avoidable debt of £1,000 in bad debt means that much wasted effort in trying to collect the money before the debt is written-off will have been expended?

Yes     No 

5. Do you recognise that if you give trade credit, having no bad debts probably means that you have been missing out on business by being over-cautious?

Yes     No 

6. Do you provide for bad debts in the preparation budgets?

Yes     No 

7. Have you made a decision as to the maximum percentage of losses or bad debts against sales you are prepared to tolerate?

Yes     No 

8. Do you adhere to a strict collection procedure timetable?

Yes     No 

9. Have you earmarked a definitive amount of working capital to finance credit sales?

Yes     No 

10. Do you know precisely how many days on average it takes to collect one day's credit sales?

Yes     No 

11. Do your invoices go out within a working day of goods being dispatched?

Yes     No 

12. Are statements posted not later than the working day following the last day of the trading month?

Yes     No 

13. Do you build credit into your selling policy and do you know to what extent?

Yes     No 

14. Are your terms of sale clearly and precisely shown on all quotations, pricelists, invoices and statements?

Yes     No 

15. Do you regularly monitor the ratio of amounts receivable (i.e. total debtor balances on the sales ledger) to sales?

Yes     No 

16. Do you prepare regular aged debt lists of all overdue customers (debtor aging lists)? Also do you know the precise value of debtors?

Yes     No 

17. Do you have a clear-cut, documented credit policy known to your sales staff, as well as the staff in the credit department?

Yes     No 

18. Are you politely firm but insistent in your collection routine?

Yes     No 

19. Do you recognise that 'over trading' is often the most common cause of slow payments?

Yes     No 

20. Have you an 'Action Plan' to deal with creditors in financial difficulties?

Yes     No 



Litigation
DebtLINK
Urgent litigation action on obstinate debtors through CPA.
LegalAdviceLINK
Free telephone legal advice 24/7/365 on commercial matters.
StatusReportLINK
Accesses prime quality business status reports and directors' information.
VerifyLINK
Immediately finds and identifies people, companies and trades.

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