CHAPTER 4: CREDIT MANAGEMENT
The appropriate credit line and pay method were assigned; Proper ethics were followed;
Documentation justifying the reduction exists if the line of credit was reduced; and Changes and updates to system changes and controls, such as score cutoffs and pricing, are in place. SEGREGATION OF DUTY Segregation of Duty was addressed in Chapter 1: Internal Controls. To further clarify this critical control from a credit point of view, the credit manager should not have the authorization to add/ change data on invoices/credit memos, the customer master file, or cash application. He or she should also not have staff in the following positions reporting to them: customer master file, billing, cash application, deductions, or bank reconciliations. During vacations and other absences, it may seem difficult to keep segregation of duty intact. For the credit manager, consider those in the accounting department or the accounts payable department who may be able to step in, rather than compromise segregation of duty. If this is not possible, make sure that this work is thoroughly audited and that system authority is only granted for the necessary timeframe to cover these absences. Here is an example of why this is important: The credit manager could open a line of credit for a nonexistent customer. Once shipments have been made, if the credit manager had authority, s/he could request the deduction clerk or billing to issue credits to clear the invoices based on their say so. Thus, a credit manager could steal products and sell them for gain. If the second signatory were in place, it would make it very difficult for the credit manager to open a line of credit for a non-existent company.
Credit Management
New Customer
Acceptance Letter to Customer
Credit Application
Sanction List
Gather Documents
Credit Check
Assign Line of Credit
Assign to: • Risk Factor • Credit Limit • Pay Method • Terms
Online or Sales Application
If on the list DO NOT do any business
• Application • Financial Statements • Credit Bureau - • Trade Group Experience • Tax Certification Scores & Reports
• Apply Formulas • Read Reports • Read Articles • Customer’s Website • Google Company • Call Sales Rep
Containing: • Credit Line • Pay Method
• Terms • Order • Requisition • Return/Damage Policy CC to Sales Rep
Re-evaluate Existing Customers
Re-analyze Slow Receivable Accounts
Adjusted Credit Term Letter to Customer
Gather New Documents
Update Credit Check
Assign Line of Credit
Same as Above
Same as Above
Same as Above
Same as Above
Review: • Past Due Report • Trade Group • Slow Pay
FIGURE 5
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THE ACCOUNTS RECEIVABLE SPECIALIST CERTIFICATION PROGRAM E-TEXTBOOK
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