Last post we talked about Credit Management for an existing customer.
For a new prospective customer, this becomes a little tricky. Analytics around the payment patterns for the last few years will not exist, and there will be no defaults. But the following points will surely exist:
- Market dynamics of the customer’s business and global trends of his industry
- Changes / challenges in the financial standing of the customer
- Regulatory influences on the customer’s business
- Competitive pressures and changes thereon
- Availability of alternative suppliers to the customer and the terms offered by them
To add to this, you may have to do a detailed analysis of the following:
- Analysis of the customer’s market standing and discussions with entities he deals with
- Review of ratings assigned by standard rating bodies, both in terms of his credit standing and also financial status
- Similar inputs can be taken from bankers and other entities
- Detailed analysis of the credit terms he commands in the market.
There a lot of unknowns and the key thing is to collect as much inputs as you could.
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