Academic journal article Journal of Accountancy

Golden Business Idea

Academic journal article Journal of Accountancy

Golden Business Idea

Article excerpt

Maintain a Good Credit Policy

As the company accountant, you often have the responsibility for setting and maintaining credit policy. And as you know, the sales department is wont to complicate your job because it invariably wants to extend and expand credit to every customer no matter what its financial condition. Often you're the o=fly effective gatekeeper in this area. Steps you can take:

* Resist efforts to issue credit lines to new customers without getting thorough credit checks.

* When asking for bank references, be sure also to ask for a breakdown of each of the customer's accounts. While large balances are reassuring, be sure that their bank loans are being repaid.

* When checking the applicant's other business references, be sensitive to the likelihood that only "friendly" references were provided, which means you should dig deeper and certainly not take all reports at face value.

* Maintain an up-to-date credit file, recording payment patterns. That way you can recognize a pattern change that may signal problems ahead.

* Even if payments are regular, check the credit reporting services for each customer at least annually. Again, that may provide you with a warning of an impending problem.

* Make it clear to the salespeople that it's their responsibility to keep you abreast of a customer's trouble signs such as layoffs or production cutbacks.

* Draft policies on how quickly you need to take affirmative action against a slow payer. Be aware that many customers who typically experience large cash-flow swings have developed very sophisticated ways to stretch payments by cycling their on-time payments among various suppliers. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed


An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.