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Tables of Contents for Credit and Collection Handbook
Chapter/Section Title
Page #
Page Count
Introduction
1
4
The Role of the Credit and Collection Manager
5
24
The Role of the Credit Department
6
1
Indications of Delinquency and Default
7
1
The Credit Dilemma
7
2
Leading and Managing Subordinates
9
2
Developing Employee Specific Goals
11
1
Appreciation
11
1
Annual Performance Reviews
11
1
Credit Managers as Problem Solvers
12
1
Credit Decisions in the Absence of Perfect Information
12
1
Hiring
12
1
Training
13
1
Training New Employees
14
1
Using the Credit Policy Manual as a Training Tool
14
1
Using Off-Site Training as a Motivational Tool
15
1
The Benefits of Cross Training
15
1
The Problem with Re-training
15
1
The Problem with Re-training
15
1
Downsizing
15
1
Redefining the Credit Manager's Role
16
1
Work Assignments
17
1
Delegation
18
1
The Credit Manager's Role as a Delegator
18
1
The Hidden Advantages of Delegation
19
1
Reducing Costs
20
1
Eliminating Surprises
20
1
Credit Risk
20
1
Remember Your Role
21
1
Managing and Training Department Personnel
21
1
Coaching Requires Constructive Criticism
22
1
Managing Customer Relationships
22
1
Goal Setting
22
1
Performance Evaluations
23
1
Dealing with Performance Problems
23
1
Dealing with On the Job Stress
24
1
Continuing Professional Education and Training
24
1
Continuing Process Improvement
25
1
Evaluating New Employees During Their Probationary Period
25
1
Recognizing Superior Performance
25
1
Reporting to Senior Management
26
1
The Credit Manager's Role as Part of the Management Team
26
1
Employee Retention
27
1
Maintaining a Current Credit Policy
28
1
Summary
28
1
Cooperation Between Sales and Credit
29
22
The Adversarial Relationship
29
1
Sales Oriented Credit Managers
30
1
Surviving the Test
31
1
Explain, Don't Justify
31
1
Credit Overrides
31
1
The Revolving Door
32
1
Lowering Credit Standards
33
1
The Goals of Sales and Credit
33
1
Us versus Them
33
3
Conflict Resolution Process
36
1
Paying Commissions on Collected Sales
37
Improving Communications Between Credit and Sales
29
9
Keeping it Professional
38
1
Working Proactively with Credit
38
1
Improving Communications
39
1
Breaking Down Barriers Between Credit and Sales
40
2
Personal Guarantees and Salespeople
42
1
Using Salespeople as Collectors
42
1
The Disadvantages of Using Salespeople as Collectors
43
1
Using Salespeople as Mediators
43
1
Ways to Improve the Relationship Between Credit and Sales
44
1
How Credit Can Help Sales
45
2
How Sales Can Help Credit
47
1
Dealing Proactively with Potential Accounts
48
1
Quick Tips to Improve the Credit--Sales Relationship
48
1
Summary
49
2
Measuring the Credit Departments Performance
51
18
Controlling Delinquencies
52
1
Day Sales Outstanding [DSO]
52
2
The Advantages of Calculating DSO
54
1
Other Negative Measurements of Performance
55
1
Reports Measuring Credit Performance
55
1
The Limitations of Bad Debt Analysis
56
1
Management Overrides and DSO
57
1
DSO, Extended Dating, and Antitrust Laws
58
1
Disputes and Deductions and Their Impact on Credit Department Performance
58
2
Techniques Used to Measure Credit Department Performance
60
7
Summary
67
2
Automating the Credit Function
69
16
Fully Utilizing Existing Software
71
2
Credit Scoring
73
4
Financial Electronic Data Interchange
77
2
Bank Cash Application
79
1
Automating the Process of Ordering Credit Reports
80
1
Automating Statements and Invoices
80
2
Interoffice Communications
82
1
Summary
82
3
Consumer Credit Policies
85
14
Consumer Credit Decision-Making
85
1
Consumer Credit---Right or Privilege
86
1
Interlocking and Overlapping Laws
86
1
The Forms of Consumer Credit
86
1
Credit Cards, and Installment Debt
87
1
Consumer Credit Checks
87
1
The Principle of Independent Credit Decisions
88
1
Factors in Consumer Credit Granting
88
1
Credit and the Law
89
1
The Equal Credit Opportunity Act
89
2
The Fair Credit Reporting Act
91
1
Consumer Reports
91
1
The Fair Credit Billing Act
92
1
The Debtor's Rights Under the FCBA
93
1
The Three C's of Consumer Credit
94
1
Collection Policies
95
1
Credit Scoring
96
1
The Conditional Sales Contract
96
1
Returned Check Policy
97
1
Calling the Debtor
97
1
Returned Check Charges
97
1
Charging Interest on Past Due Balances
98
1
Cycle Billing
98
1
Policy Requiring Customers to Provide a Street Address
98
1
Policy on Venue
98
1
Commercial Credit Policies
99
16
The Need for a Credit Manual
99
1
Out of Date Credit Manual
100
1
Mission Statements and Credit Policies
100
1
Is a Policies and Procedures Manual Worth the Trouble?
100
1
The Need for Consistency
101
1
Advantages of Having a Credit Manual
101
1
Specific Credit Policies and Procedures
102
1
Policy on Third Policy Collections
103
1
Policy on Processing Credit Applications for New Accounts
104
1
Policy Concerning Risk Management
104
1
Policies and Procedures Governing Credit Terms
105
1
Policies and Procedures Governing Discount Terms
105
1
Policies and Procedures Governing Outstanding Deductions
106
1
Policy on Maintaining Current Credit Files on Active Accounts
106
1
Policies and Procedures Governing When an Account is Referred to the Credit Manager
107
1
Policy and Procedures Regarding the Use of Third Party Collections
107
1
The Policy on Notifying Customers of a Credit Hold or Other Adverse Action
108
1
The Policy on Using Salespeople in the Role of a Collector
108
1
Policy and Procedures Governing Final Demands
109
1
Policy on Placing Delinquent Accounts Into Involuntary Bankruptcy
109
1
Policy on Ordering Proof of Delivery on Past Due Invoices
110
1
Responding Appropriately to NSF Checks
110
1
Policy for Handling Returned Checks
111
1
When to Place an Account for Collection
111
1
Policy on Selling on Open Account Terms to a Debtor in Possession
111
1
Policy on Mitigating Credit Risk in the Event of a Bankruptcy Filing
112
1
Policy on Filing Proof of Claim Forms in Bankruptcy Cases
112
1
Policy Concerning Documenting Policy Exception
112
1
Policy for Documenting Management Overrides
113
1
Solving the Problem, Not the System
113
1
Summary
114
1
Sample Credit Policy Manual
115
26
Policy and Practice
115
1
Policy Exceptions
116
1
Credit Granting Authority
116
1
The Objectives of a Policies and Procedures Manual
117
1
How vs. Why
117
1
Documenting Processes
118
1
Policy and Objectives
119
1
Fluctuating Demand
119
1
Type of Merchandise
120
1
Credit Policy is Impacted by Profit Margins
120
1
Legal Restraints
121
1
Financial Strength and Credit Policies
122
1
Loan Covenants and Credit Policies
122
1
Formulating a Credit Policy
122
1
Presenting the Credit Policy
123
1
Sample Credit Policy
124
17
Change
141
14
The Effect of Global Competition
141
1
Software Enhancements
142
1
Change and Employees
143
1
Helping Subordinates Cope With Change
143
1
Changes Within the Credit Department
143
1
Changing Work Assignments
144
1
Changing Realities in International Credit and Collection
144
1
The Changes in Foreign Buyers' Expectations
144
1
The Use of Credit Insurance
145
1
Changing Expectations About the Credit Manager
146
1
Changing Competitive Conditions
146
1
Changes in Employment, and Employee Expectations
147
1
Changing Expectations of Credit Managers
147
1
Centralization
148
1
Changing Software
148
1
Changing the Speed of Credit Decision-Making
149
1
Responding to Changing Economic Conditions
150
1
Companies Initiate Change
150
1
Encouraging Change
151
1
Changing Credit Managers
152
1
Termination Employees
152
1
Changing Expectations About Employees
153
1
Changing Expectations About Applicants
153
1
Technology Change
153
1
Change for the Sake of Change
154
1
Summary
154
1
Working with Reporting Agencies
155
14
Consumer Credit Reports
156
2
Subscribers
158
2
Consumer Access to Information
160
1
Commercial Credit Reporting Agencies
160
2
Dun and Bradstreet
162
1
The Experian Commercial Credit Report
163
1
The Foreign Credit Interchange Bureau
164
1
Using Consumer Credit Reports
164
1
Credit Interchanges
165
1
Industry Credit Groups
165
2
Using Credit Reports to Evaluate
167
1
Using Credit Ratings
167
1
Summary
168
1
Working with Banks
169
18
Personal Guarantees
170
1
Bank Financial Analysis
170
1
The Differences Between Bank and Trade Credit
171
1
Check Processing
171
1
Types of Checks
172
1
A Note About Postdated Checks
173
1
Bank Ratings for Nonborrowing Relationships
173
1
Bank Ratings for Borrowing Relationships
174
1
Requesting Bank References
174
3
Handling a Reluctant Bank Reference
177
1
Authorization to Release Bank Information
177
1
Working with Foreign Banks
178
1
Working with Banks to Accelerate Cash Flow
179
1
Advantages and Disadvantages of Lockbox Services
179
1
Discounting Letters of Credit to Improve Cash Flow
180
1
Banks and Letter of Credit Discrepancies
181
1
Banks and Debtors
181
1
When Banks Call the Loan [Demand Payment]
182
1
Indications of a Troubled Bank Relationship
183
1
The Trade Creditor's Response
183
1
Value Added Bank Services
183
1
The Automated Clearinghouse
184
1
Wire Transfer Payments
184
1
Financial Electronic Data Interchange
185
2
Trade References
187
14
When to Check Trade References
187
2
Substituting Trade Clearance Reports for Trade References
189
1
The Credit Bureau Report Alternative
189
1
Antitrust Issues
190
1
Misrepresentation of the Facts
190
1
The Risks of Telling the Truth
191
1
Once Bitten, Twice Shy
191
1
Providing False Credit References to Competitors
192
1
When in Doubt, Say Nothing
192
1
Trade References and Defamation
193
1
The Rule of Thumb for Responding to Credit Inquiries
194
1
Specifically Delegate Responsibility for Providing Responses to Reference Requests
194
1
Rating by Telephone
195
1
Ask for a Reciprocal Rating
196
1
The Limitations of Trade References
196
1
Competitor References
197
1
Payment Plans
197
2
Confidentiality
199
1
Summary
199
2
Getting Information from Publicly Held Companies
201
8
Securities and Exchange Commission Reporting Requirements
201
1
Audited vs. Unaudited Financial Statements
202
1
Canadian Financial Statements
202
1
Direct Requests
203
1
Australian Financial Statements
203
1
South African Financial Statements
203
1
German Company Financial Statements
203
1
Other Sources of Financial Information
203
1
Web Sites
204
1
Press Releases Often Contain Financial Information
204
1
Other Web Sites
204
1
Free Financial Information and Analysis
205
1
Ordering Annual Reports on Line
205
1
Customer Web Sites
205
1
Direct Contact with a Public Company
206
1
More Current Information
206
1
The Annual Report
206
1
The Prospectus
207
1
Summary
207
2
Getting Financial Information from Privately Held Companies
209
12
How Financial Statements Are Prepared
210
1
Financial Statements for Internal Use
210
1
Financial Statements and Investors
211
1
Financial Statements and Banks
211
1
Gathering Financial Information from the Customer's Bank
212
1
When to Request Financial Statements
212
1
One Reason Requests for Financial Statements are Ignored
213
1
The Financial Statement Controversy
214
1
Using Salespeople to Get Financial Statements
215
1
Tips to Improve the Chances of Getting Financial Information from Privately Held Companies
216
1
Try to Avoid a Showdown
217
1
Personal Visits
217
1
Alienating Customers
217
1
Requiring Financial Statements
218
1
Making it Mandatory
218
1
Annual Update
219
1
An Alternative to Financial Statements
219
1
A Note About Foreign Financial Statements
219
1
Internally Prepared Financial Statements
220
1
Credit Scoring
221
12
What is Credit Scoring?
221
2
Consumer Credit Scoring
223
1
Home Grown Credit Scoring Programs
223
1
Preventing Bad Debt Losses
224
1
Ignoring the Credit Score
225
1
Reasons to Override the Recommendation
225
1
Credit Scoring Flags High Risk Accounts
225
1
Consumer Credit Scoring Risk Factors
226
1
Factors in Consumer Credit Scoring Models
226
1
The Advantages of a Professionally Designed Credit Scoring Model
227
1
Sharing Credit Scores with Consumers
228
1
Limitations of Credit Scoring
228
1
Who Develops Credit Scoring Models?
229
1
Credit Scoring versus Human Scoring of Applicants
229
1
Commercial Account Credit Scoring
230
1
How Are Credit Scores Used?
230
1
The Differences Between Credit Scoring Software Programs
231
1
Internal vs. External Credit Scoring
231
1
Who Makes the Decision?
232
1
Summary
232
1
Restraints and Restrictions on Gathering and Disseminating Credit Information
233
6
Credit Rating Rules
234
1
Defamation
234
1
Preventing a Claim of Defamation
234
1
Legislation Governing Gathering Credit References
235
1
Collusion is a Prohibited Activity
235
1
Providing False Information
236
1
Credit Interchanges at Industry Credit Group Meetings
236
2
Rules for Industry Credit Group Attendees
238
1
Consumer Credit Reports
238
1
Sample Credit Application and Information Request Forms
239
22
The Credit Application as a Contract
241
1
The Short Form Credit Application
241
1
Getting Bank and Trade References to Respond
242
1
Customizing Credit Applications
242
1
Credit Applications and Credit Limits
242
1
Updating Credit Applications
243
1
Personal Guarantees
243
1
Checklist for a Personal Guaranty
244
16
Summary
260
1
An Overview of Financial Statement Analysis and Interpretation
261
20
What are Financial Statements?
261
1
Timing of Financial Statements
262
1
Manipulation of Financial Statements
262
1
The Focus of Trade Creditors
263
1
Statement of Cash Flows and Notes
263
1
The Value of Out of Date Financial Statement
264
1
Accounting Methods
264
1
Problems with Financial Statement Analysis
265
1
Balancing Financial Analysis and Other Forms of Credit Information
265
1
Financial Analysis Phobia
266
1
Footnotes to Financial Statements
266
1
How to Use-Financial Statements More Effectively
267
1
The Balance Sheet
268
2
What Concerns Short Term Creditors?
270
1
The Income Statement
270
1
The Importance of the Cash Flow Statement
271
1
Problems Interpreting the Cash Flow Statements
272
1
Operating Cash Flow
272
1
Financial Statement Audits
272
1
Trend Analysis
273
1
Trend Analysis in Dollars and Percentages
273
1
Comparative Analysis
274
1
Financial Ratio Analysis
274
4
The Limitations of Unauthorized Financial Statements
278
1
The Importance of a Quick Review of Financial Statements Received from Customers
279
1
The Going Concern Concept
279
1
Fundamental Accounting Concepts
280
1
Summary
280
1
Financial Ratio Analysis
281
14
Financial Ratios
281
1
Uses Ratio Analysis
282
1
Choosing the Right Ratios
283
1
Common Size Ratios
283
1
Using Financial Statements to Manage Credit Risk
283
1
The Types of Financial Ratios
283
9
Benchmarking
292
1
Summary
292
3
Improving Credit Department Efficiency
295
14
Spend Less Time in Meetings
295
1
Industry Group Meetings
296
1
Delegation
296
1
Dealing with Telephone Interruptions
297
1
Using the Internet
297
1
Improving Communications Within the Credit Department
298
1
Shooting the Messenger
298
1
Improving Communications with Sales
299
1
Improving the New Account Investigation Process
299
1
Making the Order Approval Process More Effective and Efficient
300
1
Communicating with Customers
300
1
Using Mistakes to Improve the Performance of Subordinates
301
1
Rewarding Superior Performance
301
1
Increasing the Chances of Collection on a Seriously Past Due Balance
301
1
Use a Binding Arbitration Clause
302
1
Improving the Process of Order Proof of Delivery
303
1
Arrange for the Bank to Conduct a Lockbox Study
303
1
Use Credit Scoring Software programs to Evaluate New Accounts
304
1
Streamline Credit Investigation
304
1
Allocate Accounts Based on Risk, Not Alphabetically
305
1
Concentrate Your Third Party Placements
305
1
Use Financial Analysis Software
305
1
Create Automatic Write Off Limits
306
1
Establish Individual Performance Goals for Everyone in the Credit Department
306
3
Summary
309
1
Factors To Consider In Consumer Credit
309
14
What is Consumer Credit?
309
1
What is a Consumer Credit Report?
310
1
Types of Consumer Credit
310
2
Denial of Credit
312
1
Consumers and Bankruptcy
312
1
Bankruptcy Fraud
313
1
Easy Credit Makes Bankruptcy More Likely
313
1
The Three C's of Consumer Credit
313
1
The Goals of the Credit Granter
314
1
Consumer Credit Do's and Dont's
314
2
Consumer Protection and the Law
316
2
How to Evaluate Consumer Credit Risk
318
2
Using Co-Signer to Manage Risk
320
1
Evaluating Credit Risk
320
1
An Ounce of Prevention
321
1
Write Offs
321
1
Summary
322
1
Making the Credit Decision
323
12
The Cascade Effect
323
1
Follow the Leader
324
1
The Conservatism Rule
324
1
Salespeople Need and Deserve Consistency
325
1
Decisiveness is a Two-Edged Sword
325
1
Develop a Support Network
325
1
Acknowledging Prejudices
326
1
Supporting the Decisions of Subordinates
326
1
Altering Credit Decisions in Light of New Information
327
1
The Credit Decision-Making Process
327
2
Every Credit Decision is Inherently Risky
329
1
Consumer Credit Decision Making
330
1
Delegation of Authority to Make Credit Decisions
330
1
Decision Support Software
331
1
Delaying Credit Decisions
331
1
Personal Judgments vs. Bureaucratic Rules
332
1
Decisions Create Further Questions
332
1
Summary
333
2
Factors to Consider in Commercial Credit Granting
335
18
The Characteristics of Commercial Credit Granting
336
1
Credit Managers are Risk Managers
336
1
Selecting the Proper Credit Terms
337
1
Offering the Proper Terms of Sale
337
1
Handling Special and Custom Orders
338
1
The Use of Cash Discounts
339
1
Unearned Cash Discounts
339
1
Anticipation Discounts
340
1
A Note About Shortening Credit Terms
340
1
The Parent---Subsidiary Relationship
340
1
Parents, Subsidiaries and Inter Corporate Guarantees
341
1
Subsidiaries vs. Divisions
341
1
Using Trade References to Manage Risk
341
1
Using Broken Commitments to Manage Credit Risk
342
1
How to Use Credit Limits
342
1
Increasing Credit Limits to Release an Order Pending
343
1
Risk Management and Automatic Approval of New Accounts
344
1
Using Bond Ratings to Monitor Credit Risk
344
1
Credit Limits and Guarantees
345
1
Act In Haste, and Repent in Leisure
345
1
Credit Risk and New Accounts
345
1
Offering Cash Discounts to Encourage Prompt Payment
346
1
Managing Credit Risk on Marginal Accounts
346
1
Credit Risks and Checks
347
5
Collection Policies
352
Negotiating Payment Payments
348
1
Limiting Bad Debt Losses
349
1
Establishing an Allowance for Doubtful Accounts
349
1
Membership in an NACM Affiliate
350
1
The Legal Form of the Business
350
1
Summary
351
2
Credit Insurance
353
14
The Benefits of Credit Insurance
354
1
Costs
354
1
Coverage
355
1
Deductibles
355
1
Coverage Limitations
356
1
Claims Processing
357
1
Disputed Balances
357
1
Claim Denial
358
1
Myths and Misconceptions About Credit Insurance
358
1
Cooperative Credit Insurance
358
1
Coverages
359
1
Credit Insurance and Customers
359
2
Typical Exclusions
361
1
The Seller's Obligations to the Insurance Company
362
1
Export Credit Insurance
362
2
Sources of Export Credit Insurance
364
1
Summary
364
3
Getting Consumers to Pay Their Bills
367
14
Indications of Financial Distress
367
1
Statistics about Consumer Debt
368
1
Secured Debt
368
1
Unsecured Debt
369
1
Civil Litigation on Unsecured Debt
369
1
The Small Claims Court Option
370
1
Preparation for Small Claims Court
371
1
Understanding the Statute of Limitations
371
1
Negotiation
371
1
Alternative Dispute Resolution
372
1
The Fair Credit Billing Act
373
1
Collection under a Conditional Sales Contract
373
1
Banks, and Other Creditors
374
1
Keep the Discussion on Track
374
1
Keep Asking Questions
374
1
Avoid Arguments
375
1
Putting Your self in the Other Person's Shoes
375
1
Start with the Facts
375
1
Persistence Is a Key
376
1
Collection Procedures Can Be Standardized
376
1
Responding to Extended Dating Requests
376
1
Questioning Delinquent Debtors
377
1
The Federal Fair Debt Collection Practices Act
378
1
The Fair Debt Collection Practices Act
378
1
Collection from New Customers
378
1
Do Not Put a Customer on Hold During a Collection Call
378
1
Summarize Points of Agreement
379
1
Sumamry
379
2
Getting Commercial Accounts to Pay More Promptly
381
12
Prior to the Sale
381
1
Collecting in Person
382
1
Collection by Telephone
382
1
Preparation for a Customer Visit
383
1
Using the 80/20 Rule
383
1
Accelerate Collections Through the Use of a Bank Lockbox
383
1
Accelerate Cash Inflows with Software Enhancements
384
1
The Squeaky Wheel Concept
385
1
Expect Excellence from Subordinates
385
1
Eliminate Rotten Apples
385
1
Address the Problem, Not the Symptom
386
1
Strictly Enforce Cash Discount Terms
387
1
Encourage Customers to Take Earned Discounts for Prompt Payment
387
1
Be Direct About Collections
388
1
Be Stricter with New Accounts
388
1
Use a Different Opening Line in a Collection Call
389
1
Confirm Payment Commitments
389
1
Be Specific About the Consequences of Delayed Payment
390
1
Holding Orders
390
1
If You Want Things Done Right, Be Prepared to do Them Yourself
391
1
Summary
391
2
Handling Delinquent Commercial Accounts
393
22
Governing Laws
394
1
Improving Collection Results with Delinquent Commercial Accounts
394
1
Collections from Newly Formed Businesses
395
1
Collecting from New Accounts
396
1
Collecting During Personal Visits
396
1
Preparing for Collection Calls
397
1
Handling the Collection Call
397
1
Using Ultimatums as Collection Tools
397
1
Professionalism as a Collection Tool
398
1
After the Call
398
1
Confirming Commitments
398
5
How to Negotiate with Seriously Delinquent Debtors
403
Good Deals and Bad Deals
300
99
A Word about First Offers
399
1
Evaluating Payments Proposals
400
1
Limit Authority to Accept Payment Plans
401
1
Tips for Reducing Delinquencies
401
1
Finding the Right Contract
402
1
Handling Difficult Customers
402
2
Using Credit Holds to Encourage Payment
404
1
Working with the Buyer
404
1
Broken Commitments as a Red Flag
405
1
Negotiating Disputed Balances
405
1
Using Arbitration to Collect Disputed Balances
406
1
Resolving Delinquent Balances Through Mediation
406
1
Extending Collection Calls
406
1
How to Withdraw an Open Account
407
1
Using Promissory Notes to Manage Delinquent Accounts
408
1
What to Look for When a Subordinate Refers a Delinquent Account
409
1
Using Salespeople as Collectors
409
1
Global Out of Court Settlements
410
2
Putting Collection Agencies to Work
412
1
The Role of Cash Discounts
412
1
Using Personal Visits to Address Delinquent Balances
413
2
Reducing Credit Risk
415
14
A Balancing Act
415
1
Getting to Know the Customer
416
1
Monitoring Payments
416
1
Collect Actively, Not Passively
417
1
Using Credit Limits to Manage Credit Risk
418
1
Establish a Credit Limit for Every Account
419
1
Using Credit Terms top Reduce Credit Risk
419
1
Proper Collection Techniques Help Reduce Risk
420
2
Hold Subordinates Accountable for Their Mistakes
422
1
The Goal is Not to Eliminate Losses; It is to Reduce Risk
422
1
Try to Transfer the Risk
422
1
Accepting Special, Customized Orders
423
1
Recognize the Limitations of Personal Guarantees and Other Assurances of Payment
424
1
Recognizing the Limitations of Financial Statement Analysis
424
1
Using open Account Terms to Establish New Accounts
425
1
Reduce Risk by Refusing to Be Rushed
426
1
Bullet Proofing the Department Against Credit Fraud
426
1
Summary
427
2
Using Third Party Collections
429
16
Collection Agency Qualifications
430
1
Collection Agencies Are Not Created Equal
430
1
The Telemarketing Collection Agency
431
1
The Fair Debt Collection Practices Act
431
1
Why Are Third Party Collectors Necessary?
432
1
Contingency and Noncontingency Collections
433
1
Low Collection Rates are Not Necessarily the Best Deal, and High Rates Don't Always
Involve the Best Service
434
1
Beware of Unusual Fee Arrangements
434
1
How to Select a Collection Agency
435
1
Other Factors in Selecting a Collection Agency
435
1
Professional Collection Agencies
436
1
Referrals
436
1
Determine the Minimum Size Claim the Agency Will Accept
437
1
How to Negotiate a Better Rate
437
1
Questions to Ask a Prospective Collection Agency
437
2
How to Evaluate the Performance of a Collection Agency or Collection Attorney
439
1
When to Place an Account for Collection
439
2
The Point of Diminishing Returns in Collections
441
1
Disputed Balances
441
1
Steps to Take Before Placing an Account for Collection
442
1
Choosing the Right Collection Agency
442
1
Working with Your Collection Agency
442
1
Direct Negotiations with the Debtor
443
1
What about Returns?
443
2
Using Collection Attorneys
445
12
Similarities between Collection Agencies and Collection Attorneys
445
2
Questions to Ask a Collection Attorney
447
1
Using In House Attorneys
448
1
Misappropriation of Recovered Funds
448
1
What Exactly Is a Collection Attorney?
448
1
Creative Billing Options
449
1
The Litigation Threat
449
1
The Two Step Litigation Process
450
1
How Collection Attorneys Work
450
1
The Asset Search
451
6
Litigation
457
Court Costs
451
1
Facilitating Collections
452
1
Comparing Collection Attorneys to Collection Agencies
453
2
Summary
455
2
Credit and the Law
457
22
The Uniform Commercial Code
457
1
Direct Regulation of the Commercial Credit Decision-Making Process
458
1
What Is Consumer Credit?
459
1
Credit and Antitrust Laws
459
1
The Sherman Act and The Clayton Act
460
1
The Robinson-Patman Act
460
1
The Federal Trade Commission Act
461
1
Defamation
461
2
Discrimination in Credit Granting
463
1
Rules Relating to Co-Signers
463
1
Title
464
1
Offer and Acceptance
465
1
Dispute Resolution and Warranties
465
1
Conflict of Laws
466
1
Credit Fraud
466
1
Becoming a Secured Creditor
467
3
Consignment Sales
470
1
Payment Default and Perfected Security Interests
470
1
Bankruptcy
470
1
The Automatic Stay
471
1
Using Promissory Notes to Document Payment Commitments
472
1
Partnerships
472
1
Corporations as a Separate Legal Entity
473
1
Preferences
473
1
Venue
473
1
Litigation
474
1
Summary Judgment
474
1
Post Judgment Collection
474
1
Litigation Alternatives
475
1
Arbitration
476
1
Assignments for the Benefit of Creditors
476
1
Reclamation
476
1
Summary
477
2
Collections And Bankruptcy Law
479
18
Types of Bankruptcies
479
5
Bankruptcy Statistics
484
1
Filing an Involuntary Bankruptcy
484
1
Bankruptcy Code Amendments
485
1
The Value of Personal Guarantees
485
1
The Automatic Stay Provision
485
1
Filing a Proof of Claim
486
1
Reclamation Claims
487
1
The Debtor in Possession
488
1
The Role of a Trustee
488
1
The United States Trustee Program
489
1
Steps to Take after Notification of a Bankruptcy
490
1
The First Meeting of Creditors
491
1
Reclamation Claims
491
1
Discharge vs. Dismissal
492
1
Common Mistakes Made When Filing a Proof of Claim
492
7
The Official Unsecured Creditor's Committee
499
Converting a Reorganization Into a Liquidation
494
1
Discharge of Debts
495
1
Summary
495
2
Credit Fraud
497
22
The Con Man
497
1
Fraudulent Financial Statements
498
1
Credit Criminals
498
1
Mail Fraud and Wire Fraud
499
1
Credit Fraud Normally Involves a Conspiracy
499
1
How Widespread Is Credit Fraud?
500
1
Indications of the Possibility of Credit Fraud
500
2
An Inside Job
502
1
Bankruptcy Fraud---The Bustout
503
1
In a Bustout, Timing is Critical
503
1
Bustouts Don't Just Involve New Accounts
504
1
Bankruptcy Fraud
504
1
Asset Concealment
505
1
Abuse of the Automatic Stay
505
1
Piercing the Corporate Veil
505
1
Can Creditors Prevent Bustouts?
506
1
Diversion of Shipment Fraud
507
1
Fraudulent Trade References
508
1
Verifying the Customer's Trade References
509
1
Contradictory Information
509
1
Fraudulent Auditor's Opinion Letter
510
1
Fraudulent Financial Statements
510
1
Bulk Sales and Fraud
511
1
Check Fraud
511
1
The Fraudulent Cashier's Check
512
1
Using the ACH to Beat Check Fraud
513
1
NSF Checks
513
1
NSFs and Fraud
514
1
The Name Game Scam
514
1
Internet Fraud
515
1
International Fraud
515
1
Combating International Fraud
516
1
Summary
517
2
Fraudulent Financial Statements
519
14
Financial Statement Fraud
519
1
Delivery of Fraudulent Financial Statements
520
1
The Myth Credit Managers Can Spot Financial Statement Fraud
521
1
Fraudulent Financial Reporting in Publicly Traded Companies
522
2
Glaring Mistakes
524
1
Looking for Inconsistencies
525
1
How to Falsify Financial Statements
525
2
Conditions That Contribute to the Potential for Fraud
527
1
The Intimidation Factor
527
1
Audited Financial Statements and Fraud
528
1
The Responsibilities of Independent Auditors
529
1
Telltale Signs of Fraudulent Financial Statements
529
1
The Securities Act of 1933
530
1
Summary
530
3
Bulletproofing Your Organization Against Fraud
533
14
What is Credit Fraud?
534
1
The Criminal Masterminds
534
1
A One-Person Band
535
1
Conspiracies
536
1
How Do Con men Fool So Many Credit Managers?
536
1
Educating the Credit Department Staff
537
1
Stop Blaming the Victim
538
1
NACM's Loss Prevention Department
538
1
If It Sounds Too Good to be True ...
539
1
Red Flags
539
2
To Prevent Fraud, Check the Ship-to Location
541
1
Be Vigilant against Fraudulent Telephone or Fax Numbers
542
1
Watch Out for COD Checks
543
1
Defeating Internal Fraud
543
1
Using Personal Visits to Defeat Fraud
543
1
Bustouts
544
1
Summary
544
3
Managing Disputes and Deductions
547
12
Deduction Management Requires Teamwork
548
1
Proactively Managing Deductions and Disputes
549
1
Deduction Management Software
550
1
Pricing Errors
551
1
Unearned Cash Discounts
552
1
Disputing the Terms of Sale
552
1
Disputed Terms and Conditions of Sale
553
1
Establish Deadlines
554
1
Compromise
554
1
Consider Creating a Chargeback Specialist
554
1
Warranty Disputes
555
1
Creating an Automatic Write Off for New Deductions
556
1
Arbitration
556
1
International Arbitration Services
557
1
Outsourcing Deduction Resolution
558
1
Summary
558
1
An Overview of International Credit And Collection
559
16
Export Sales Stimulate Growth and Create Jobs
559
1
International Open Account Terms
559
1
International Terms of Sale
560
1
International Risk Management
560
1
Gathering Information
561
2
Alternative Terms
563
1
The FCIB
564
1
Controlling Exports
564
1
International Terms of Sale
565
1
Documentary Collections
565
1
International Letters of Credit
566
1
Advantages and Disadvantages of Open Account Terms
566
1
Consignment Sales
566
1
Collections in Foreign Countries
567
1
The Role of Banks in Foreign Sales
568
1
Foreign Financial Sales
568
1
Foreign Exchange Considerations and How to Manage Credit Risk
569
1
Export Licenses
570
1
Shipping Terms
571
1
Foreign Exchange Risk
571
1
Foreign Exchange Hedging
571
1
The Role of Freight Forwarders
572
1
Summary
573
2
Preparing for International Credit Transactions
575
16
Establishing the Credit Terms
576
1
Reasons to Require Additional Assurance of Payment from Foreign Customers
576
1
Learning about International Business
576
1
The Trade Information Center
577
1
Selecting the Appropriate Credit Terms
577
1
Cash on Delivery
577
1
Sight Drafts
578
1
The Risks Associated with Drafts
579
1
Credit Cards
580
1
Sales on Open Account Terms Covered by Export Credit Insurance
580
1
Sources of Credit Insurance
581
1
Factoring
581
1
Forfaiting
582
1
Selling on Letter of Credit Terms
583
1
Letter of Credit Rules
584
1
Letter of Credit Discrepancies
584
1
Banks and the UCP 500
585
1
The Role of the Freight Forwarder
586
1
Shipping Terms
587
1
Insurance against Loss in Transit
587
1
Open Account Terms
588
1
Evaluating Sovereign or Political Risk
588
1
Dealing with Foreign Languages and Customs
588
1
The Role of the Salesperson
589
1
International Salespeople Need Information to Help
589
1
Communicating with Foreign Customers
589
1
Antiboycott Regulations
589
1
Summary
590
1
Credit and Collection and International Law
591
12
The Challenge
591
1
Export Licenses
592
1
The Foreign Corrupt Practices Act
592
1
Compliance with Foreign Regulations Governing Imports
593
1
Collection against Foreign Open Account Shipments
594
1
Recognition and Enforcement of Foreign Money Judgments
594
1
Import Restrictions
595
1
International Law
595
1
The United States Convention on Contracts for the International Sale of Goods
596
1
Complexity Is a Difference
596
1
Dispute Resolution
596
1
The United Nations Convention
597
1
Obligations of the Seller in an International Contract
598
1
The Buyer's Obligations
598
1
Licenses
599
1
Labels
599
1
Insurance
600
1
Common Carriers
600
1
Accounting Rules
601
2
The Letter of Credit Process
603
10
Advantages and Disadvantages of a Letter of Credit
603
1
The Letter of Credit Process
604
1
Rules for Processing Letters of Credit
605
1
The Doctrine of Strict Compliance
605
1
Amendment of a Letter of Credit
606
1
Common Problems with Letters of Credit
607
1
Letter of Credit Consultants
607
1
Letters of Credit are Date Specific
608
1
The Role of the Issuing Bank
608
1
Providing Specific Letter of Credit Instructions to Buyers
609
1
Letter of Credit Confirmation
610
1
Advantages of Confirmation
610
1
Sight vs. Time Letters of Credit
610
1
Discount a Letter of Credit
611
16
Sight and Time Letters of Credit
627
Avoiding Problems Caused by Third Parties
611
1
Special Types of Letters of Credit
611
1
Summary
612
29
Outsourcing
641
1
Consignment Sales
641
1
Electronic Commerce
641
1
Credit Fraud Will Remain a Growth Business
642
1
Keys to Success
642
1
Summary
643
Glossary
613
18
Index
631