Credit management

Credit management includes assessing customers before granting credit, setting limits and terms, monitoring balances and collecting overdue amounts. Sources of evidence may include financial information, payment history, credit reports and trade references, each with limitations. A tighter policy can reduce losses and funding needs but also lose profitable sales; a looser policy may increase revenue at the cost of more receivables and bad debts. Evaluate incremental profit, administration, discount and financing effects together. An aged receivables analysis helps target action but is not itself proof that an amount is irrecoverable.