Credit Management – KASNEB Syllabus CCP

PAPER NO. 1 CREDIT MANAGEMENT

GENERAL OBJECTIVE

This paper is intended to equip the candidate with the knowledge, skills and attitude for the application of the concepts and techniques of credit management.

LEARNING OUTCOMES

A candidate who passes this paper should be able to:

  • Apply the principles of credit in a business environment
  • Analyse the effects of cost of credit to the business and economy as a whole
  • Perform debt collections activities
  • Organise and supervise a credit

CONTENT

Introduction to credit

  • Definition of credit
  • History of credit
  • Reason for and benefits of extending credit
  • Effect of credit to the business
  • Three major categories of credit (consumer; trade and export credit)

Credit department structure and responsibilities

  • Organisational structure of a credit department
  • Role of the credit department within an organisation
  • Reporting lines of a credit department within an organisation
  • Reporting performance of a credit department
  • Credit department staff recruitment and retention
  • Promoting interdepartmental relationship (sales and Marketing; accounts and finance; risk and internal audit; procurement; operations departments)

The credit policy

  • Definition of a credit policy
  • Objectives of a credit policy
  • Types of credit policy
  • Features of a credit policy
  • Advantages of a credit policy
  • Contents of a credit policy
  • Formulation and implementation of a credit policy
  • Operating principles of a credit policy
  • Factors to consider when designing a credit policy

Credit risk management

  • Credit risk defined
  • Forms of credit risk
  • Distinction between credit management and risk management
  • Common causes of credit risk situations
  • Objectives of credit risk management
  • Role of senior management and Board of directors in risk management
  • Best practices in credit risk management
    • Credit scoring
    • Methods against credit risk hedging
    • Credit culture

Creditworthiness assessment

Definition of credit worthiness

  • The credit appraisal process
  • Sources of information used in credit appraisal
  • Use of financial statements in credit appraisal and evaluation
  • Qualitative information used in credit assessment
  • Techniques and models used in credit assessment
  • Market risk assessment in granting credit
  • Individual and company credit application assessment

Sales ledger administration

  • Definition of sales ledger
  • Sales ledger format and contents
  • Statements and reports
  • Sales ledger control
  • Importance and interpretation of a sales ledger

Credit terms

  • Definition of credit terms
  • Factors affecting determination of credit terms
  • Types of credit terms
  • Effects of credit terms on working capital management

 Payment methods

  • Definition of a payment method
  • Factors to consider in choosing a payment method
  • Types of payment methods
  • Advantages and disadvantages of various payment methods

Collection management

  • Overview of collections
  • Establishing targets
  • Collection planning
  • Collection cycle
  • 80/20 principle application in collections
  • Collection tools and methods
  • Computer aids to collection
  • Communication with defaulters
  • Restructuring of debts
  • Rules for effective collection practices
  • Mistakes made during collection
  • Reasons for delays in payments
  • Third party collectors
  • Collection through alternative dispute resolutions(ADR)
  • Legal process for debt recovery

Credit insurance

  • Definition of credit insurance
  • Characteristics of a good credit insurance cover
  • Basic principles of domestic credit insurance
  • Financing of credit insurance premiums
  • Benefits of credit insurance to an organisation
  • Types of credit insurance policies
  • Advantages and disadvantages of credit insurance

Automation of credit function

  • Process of automation of credit function
  • Benefits of automating of credit operations
  • Types of credit management information software
  • Customer master file
  • Online credit management
  • Billing management system

Emerging issues and trends



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