AR business

Exhibit 2 is a Check Sheet for your use in evaluating new Credit and A/R Systems. It lists very specific items which most companies can use as a guideline in evaluating software packages for credit and A/R.

 Self-Evaluation of Organization Roles
The roles performed by the credit function can be broadly classified into five categories:
1. credit risk management
2. credit risk reporting and control
3. collections
4. cash application and
5. discrepancy resolution.
A self-evaluation effort involves critical examination of how these roles are performed with the resources devoted to the execution of these functions. Your examination may start from the broad categories and be refined as required. Examples of the finer tasks involved in each of the broader categories may include the following:
Credit Risk Management
• assess credit risk of prospective customers
• evaluate credit risk of marginal accounts
• _update analysis for existing customers
• approve credit sales
• set credit lines
• approve cash discounts
Credit Risk Reporting and Control
• report and advise on receivable status
• negotiate secured instruments
• manage risk/insurance
Collections
• current receivables management
• past dues management
• lockbox management
• bad-debt management
Cash Application
• system management and _update
• timely application
• accurate application
Discrepancy Resolution
• address cash discount issues
• resolve customer deductions
• resolve chronic delinquency problems (e.g., restructure past dues)
To achieve good customer service, it is necessary for the credit, collection and accounts receivable functions to periodically, critically review the significance of each task performed in relation to the total corporate objective and the resources available. For example, how many resources should be devoted to the credit investigation of a long-time customer with sound financial background versus a new customer with little financial information available? How much additional effort should be spent on the collection of a certain past due versus writing it off as bad debt? It is clear that a good self-evaluation effort should yield much insight to the corporation’s requirements of the department. This should also allow you to more effectively plan and use the limited resources available.

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