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
What is the primary purpose of a written credit policy in an organization?
Answer: To establish consistent guidelines for extending credit
A written credit policy provides consistent guidelines ensuring all credit decisions align with company objectives and risk tolerance.
Which element is MOST critical when setting customer credit limits?
Answer: Customer's payment history and financial strength
Payment history and financial strength are the most critical factors because they directly reflect the customer's ability and willingness to pay.
A credit hold is BEST used when:
Answer: A customer's account is significantly past due
A credit hold is placed on significantly past-due accounts to stop further exposure until the delinquency is resolved.
Which metric is most commonly used to evaluate the effectiveness of a credit department?
Answer: Days Sales Outstanding (DSO)
DSO measures how quickly a company collects receivables, making it the primary metric for evaluating credit department effectiveness.
When a credit policy review is recommended, what should trigger an immediate update?
Answer: Significant changes in economic conditions or business strategy
Credit policies must be updated immediately when economic conditions or business strategy shift to ensure risk parameters remain appropriate.
What does a tiered credit approval process typically involve?
Answer: Delegating approval authority based on dollar amount thresholds
A tiered process assigns different approval authority levels based on credit limit size, improving efficiency while maintaining controls.