CCM Credit Policy & Procedures Flashcards
6 cards from real CCM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CCM Credit Policy & Procedures flashcards as text
Which of the following BEST describes a credit application's purpose?
Answer: A tool to collect financial and trade reference information for underwriting
A credit application collects financial data and trade references needed to underwrite and set appropriate credit terms.
A personal guarantee on a business credit account means:
Answer: An individual owner assumes personal liability for the business debt
A personal guarantee makes the owner personally liable for the business debt if the business cannot pay, adding a layer of security.
What is the role of trade references in a credit application?
Answer: To provide insight into how the applicant pays other creditors
Trade references reveal the applicant's payment behavior with existing creditors, helping predict future payment performance.
Credit terms of '2/10 net 30' mean:
Answer: A 2% discount if paid within 10 days; full amount due in 30 days
2/10 net 30 offers a 2% early-payment discount if the invoice is paid within 10 days, with the full balance due in 30 days.
Which procedure helps prevent duplicate payments and fraud in the credit-to-cash process?
Answer: Segregation of duties between billing, cash application, and collections
Segregation of duties ensures no single person controls all steps in the cash cycle, reducing fraud and error risk.
What should a credit policy specify regarding new customer onboarding?
Answer: Documentation required, credit limit starting point, and review timeline
New customer onboarding procedures in a credit policy define required documents, initial limits, and when the account will be reviewed.