1. Business Administration & Management Mr. Bernstein Credit Principles and Practice, pp 479-492 June 1, 2015

2. Business Administration & Management Mr. Bernstein When Do Businesses Extend Credit? When they believe it will increase sales When they believe they are likely to be paid in full 2

3. Business Administration & Management Mr. Bernstein Retail Business Credit Work with national credit card companies Establish a branded credit card Offer consumers credit plans Partner with finance co. (white label) Build in-house finance team 3

4. Business Administration & Management Mr. Bernstein 4 Credit Policies: The 3 C’s of Credit Character Capacity Capital

5. Business Administration & Management Mr. Bernstein Establishing a Credit Policy Credit Department typically reviews and revises Should fit with company’s overall objectives Includes total capacity, application by product, sales terms, collateral, collection terms, pricing and exceptions 5

6. Business Administration & Management Mr. Bernstein Analyzing Credit Sales Aging the Accounts – 30 days, 60 days, 90+ days Unpaid after 90 days: 73% chance of payment Unpaid after 1 year: 30% chance of payment Must monitor trends May need to “fire” some customers to preserve capital and balance sheet 6