Credit and Collection (Finals) Flashcards
2 Methods in appraising Chattels
Market Value Approach
Cost Approach
It is composed of more than 200 member – companies from the banking and trade, manufacturing, financing and insurance communities.
Credit Management Association of the Philippines (CMAP)
Frequency of purchase or other circumstances may make it necessary for certain special treatment of individual cases.
- Usually utility bills such as electricity, water, internet
End of the Month (EOM)
which is automatically considered tha appraised value and 50% will be the loan value
Secondhand Value
3 Types of Business Organization
Single Proprietorship
Partnership
Corporation
property assigned to the third party can also be offered as collateral.
Deed of Assignment
2 Other Cash Terms
End of the Month (EOM)
Discounts
Type of debtor does not pay on
time because he finds it difficult to part with his money
Uncooperative and Indifferent Debtor
2 Types of Discounts
Cash Discount
Trade Discount
these are the stock whose prices are quoted and transacted through electronic market such as PSE.
Listed Stock
these are properties consist of fixed or immovable properties
under the generic name term “Land”
Real Estate
it is initially started when a prospective borrower
applies for a loan.
Personal Interview
this entails the gathering of current sale price or market values of the chattel being appraised.
Market Value Approach
it is the gathering of available information about the
applicant.
Credit Information
Collection records must be kept and maintained and should indicate when notices were sent
Enforcement
It is a kind of letter which is formal and unusual, when a delinquent debtor receives letter on his account, he may be facing serious immediate attention and action
Registered Letter
Whether the investigation is a routine matter or a special case and the purpose is general or specific.
Purposes and Types of Investigation
Sound credit management principles dictate the result must
be evaluated against company policies and procedures.
Evaluation
It is a complex process known as credit checking or credit granting.
Financial Analysis
this groups consists of individuals and business entities that are conscious of their financial obligation which they discharge
promptly without the need of being reminded about them
Prompt Payer
Which is by far is the principal C of credit represents a good
moral risk
Confidence
2 Alternative Approaches to Credit Rating
Inward Approach
Outward Approach
2 Types of Valuation
Firsthand Value
Secondhand Value
It is to ascertain the actual existence of the property used to
determine its exact location and to look into its actual condition
Inspection
It is not merely poor prospect for business, no prospect at all.
He will shun the creditor, if only from a sense of personal embarrassment
Delinquent Debtor
It is used to inform delinquent debtor of the consequence that will befall upon him when the case is brought to court.
Demand Letter
It is the stability of the country which pertains to the risk of
exchange must also be taken into account
Currency
The nature of the commodity generally circumscribes the terms of sales such as: Cash Basis, Installment Basis, and Deferred Payment
Commodity as Factor
It is situated along the busiest section in town, district, or cities.
Commercial Land
4 Qualities of a Good Bill Collector
Industry
Persistence
Tact
Resourcefulness
8 Qualities of a Good Collection Letter
- short and direct
- use dated action
- written from the customer’s viewpoint
- not provide any cause oor occasion to arouse the anger and bitterness of the customer
- revised periodically
- humanistic approach
- follow a definite pattern
- written in such a way as to make it appear as if it were the last to be sent to the debtor
3 Main Themes of CMAP
- To inculcate credit consciousness
- To place the credit men as a professional
- To infuse credit discipline
A big-time syndicate, who victimize business firms involving large sums of money
Credit Fraud
It measures or specify the credit period when payment will be made. It measures a credit period.
Term
(Statement of Changes in Owner’s Equity)
Reconciliation of the capital accounts and summary changes.
It evolves from an unwritten set of standards, sometimes very
nebulous, to more specific criteria covering the condition under which loans are made.
Credit Policy
which depicts the financial condition of the business firm
at the end of a specified period.
Balance Sheet
came from an old French ”Capitalae” meaning movable property
Chattel
willingness to discharge financial obligation
Character
It is an effective medium in collecting debts, it gives the opportunity to talk personally.
Telephone Calls
3 Most Common Types of Corporation
Public and Private
Stock and Non-Stock
Domestic and Foreign
summary form a breakdown of the financial statement of the
company, reflecting its latest financial condition and the result of operation for the past three or five years.
Financial Condition
Refers to compensating consideration purposely intended to shield the interest from bad debts
Collateral
It is the maximum amount of credit which may be permitted to remain outstanding on account
Quantitative Credit Limit
It covers the complete business records such as the date of
incorporation, type of business organization, record of registration with the proper authorities, the names of incorporators and the summary of operating records.
Company’s Background / History
2 Types of Credit Rating Agencies
a. Agencies that provide credit information with regard to businessmen and companies.
b. Agencies that provide credit information with regard to individual purchaser.
This type of debtor always exhibits an air of defiance.
Pugnacious Debtor
statement which summarizes the
financial operation over a period of time.
Income Statement
3 Scope of Credit Policy
Credit Terms
Credit Period
Credit Limit
Internal Sources of Information (5)
- Debtor’s previous record with the business firm.
- Credit man’s personal knowledge of debtor’s character and reputation.
- Personal Contacts with debtor.
- Analysis of debtor’s financial statement.
- Audits or surveys of the business.
It adopts a system of gathering and putting every information about customer and application into a folder which is filed in proper order.
Credit File
5 Benefits from Collection Effort
- Reduction in the volume of account receivable.
- Freeing capital for business operations.
- Increasing profts through decreasing expenses.
- Shortening of credit period.
- Establishing a line of customer who are financially sound.
From the Credit Management Association of the Philippines (CMAP)data on court cases could be gathered information about the subject’s involvement in, not only collection and other civil cases, but also criminal cases as well.
Court Cases
refers to the bonus offered to induce the earlier payment of
the bill.
Discounts
The scope depends on such factors since the report must be finished on the date it is needed by the requesting bank.
Time and Resource Constraints
5 Classifications of Land
Commercial Land
Residential Land
Industrial Land
Agricultural Land
Raw Land
3 Different Types of Delinquent Debtor
I. Fair Credit
- Careless Borrower
- Complainer
- Unforseen Problems
II. Slow Credit
- Poor Manager
- Marital Problems
- Coward
III. No Good Credit
- Live beyond his income
- Gypsy
- Crook
It includes time when payment has been made and discounts if any, that will be allowed for prompted payment.
Credit Terms
Are those companies which have stable operation, good
management, and usually yield handsome dividend very regularly
Prime Stock
the appraiser should not only determine the actual condition but its use.
Usage
