-
The Significance Credit Management In Business Organization
CHAPTER ONE -- [Total Page(s) 4]
Page 1 of 4
-
-
-
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
In some years back, cash management has become the most important sector of the financial management in many trading organization. This is because without adequate cash, a business can not exist. For this reason, cash is often des cribed as the life blood of a business and it controls the means of maintaining commercial health. This serves. To emphasis one vital message that liquidity is a pre-requisite for commercial life and cash management is as natural as staying alive.
For single purpose of securing sales, credit is extended to customers, credit sales, therefore, has been an essential tool of modern competitive economic systems. It is an important marketing tool to aid sales of goods.
Generally, it is made on open account (i.e. no formal acknowledgement, of debt. Obligation through a financial documents) but in order to achieve its aim of securing sales, it is essential therefore, that it achieves this and that it does so profitably.
Credit management is the term given to this, failure to apply such control, often leads to emergency collection of debts, and since total debtors are more in value and nature with the daily change in business there is no substitute for a proper credit management system many business that gives credit to its customers.
A carefully considered credit policy is needed by any company that sells goods or provides services on credit. The state of development that this policy has reached will obviously vary from one organization to another. In some companies goods may be sold on credit because competitors provide generous credit facilities and as a result no real consideration may have been given to the circumstances in which credit would be given or not. In not more efficient company, however credit policy will almost certainly have been considered much more seriously very often as part of the overall aims and objectives of the organization.
This is because credit policy can have a significance influence upon sales, credit policy provides framework to determine whether or not to extend credit to a customer and how much credit to extend. It operates through the credit standards and credit analysis. Credit standard gives the basic criteria for the extension of credit to a customer. This is done through some various mean like.
(a) Credit rating; looking into past records through agencies and deducing the credit worthiness.
(b) Credit reference: data of the prospective debtors as gather by bank, old customers e.t.c
On the other hand, credit analysis involves procedures for evaluating credit applicants
This will be proceeded by the collection of information. The services of information may be through
Financial statement: at the time of prospective sales the seller may request a financial statement as one of the most desirable sources of information for credit analysis. Having collected the credit information, be firm will make a credit analysis of the applicants.
Collection policy undertakes the combination of collection procedure it also includes the expression of credit terms. These are the terms and condition on which trade credit will be made available. It stipulates the repayment terms of receivables. Credit terms involve both the length of the credit period and the discounts given. This is essential control that no business could afford to ignore. It takes the liquidity problem of the business as its credit system and hence, the significance of credit management is necessary to be studied.
1.2 STATEMENT OF PROBLEM
This research work is aimed at finding out the significance of credit management in business organization. Therefore, the research work looks into the under listed problems which might be facing the organization in order to draw inferences on the best solution to problem these are:
i) Whether credit extension have any effects on turnover
ii) Whether credit extension influence the stay of customer in a particular organization
iii) Whether credit extension have any positive or negative effect on the overall performance of the organization
iv) Whether credit extension is the cause of cash shortage i.e. liquidity problem
CHAPTER ONE -- [Total Page(s) 4]
Page 1 of 4
-
-
ABSRACT - [ Total Page(s): 1 ]ABSTRACT This project is to enlighten, motivate and give understating on the significance of Credit management in business organization, the Chapter One aspect will give details in background of study, statement of problems objectives, scope of study, definition of the terms, the working hypothesis, history review shall emphasis on the need for credit management, credit policy, collection, level of risk, historical standard for credit worthness indicators, account of sales and credit i ... Continue reading---
