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Credit Control
Credit control is the system used by businesses and central banks to make sure that credit is given only to borrowers who are likely to be able to repay it. As such matters are rarely certain, credit controllers control lending by calculating and managing risk.
Overview
Credit control is part of the financial controls that are employed by businesses particularly in manufacturing to ensure that once sales are made they are realised as cash or liquid resources.
Credit control is a critical system of control that prevents the business from becoming illiquid due to improper and un-coordinated issuance of credit to customers. Credit control has a number of sections that include - credit approval, credit limit approval, dispatch approvals as well as collection process.
In a large business a credit process will be run by a senior manager and will include processes as such as Know Your Customer (KYC), account opening, approval of credit and credit limits (both in terms of the amounts and the terms e.g. 30 Days, 30 Days net), extension of credit and effecting collection action.
Credit control will normally report to the Finance Director or Risk Management Committee.
Procedures for issuing credit
During the selling process a potential customer or even a current customer who pays cash may request for credit lines to be extended. At this point the following process may be followed:-
1. Formal letter of application for credit to be extended to a customer entity
2. Head of Finance evaluates the credit requested
3. Risk managers evaluate if the credit fits in with the current risk portfolio
4. Credit Collection period (usually in Days) is considered both as a stand-alone and as a component of the working capital cycle in particular ensuring that it does not exceed the Payables Period (usually in Days too).
5. External rating agencies may be invoked to assess the risk attached to extending credit to the customer. Usually credit worthiness of a firm may be assessed independently by firms such as Dun & Bradstreet, Bloomberg, AC Nielsen or other reputable firms.
6. Fillers are also made into the market to assess the credit worthiness of a firm
7. An internal evaluation is made considering the risk of Bad or Doubtful Debts against the profit or returns.
8. After Risk Manager and Finance Director is satisfied that the extension of credit will not result in loss of principal. Credit is extended.
9. An account is opened with the credit setting set for the agreed terms: Cap of credit the customer will enjoy and the terms or duration which they will enjoy that credit. In other words, the time-limit as well as the value of the credit are sides of the same coin.
Non-collectibility of extended credit
Extended credit could, despite all efforts made, become noncollectable. In this case a professional Debt collection agency may be hired along with attendant legal, court and other fees. This event is normally dreaded and most Chartered Accountants are reluctant to consider that credit extended has now become noncollectable necessitating a debt write off if the receivable has gone bust or a provision if only a lower amount can ultimately be collected.
Risk of credit
Unwarranted debt may be a serious strain on the company and could lead to company failure. Many SMEs have failed due to unsatisfactory Debt Collection processes or procedures. During the credit crunch many businesses experienced a serious credit risk and severely curtailed extension of credit to partner firms and businesses. Even though the current situation is much less severe credit extension remains a key, pivotal role in business management.
The origins of the city date back to the founding of a monastic establishment on the site of Bangor Cathedral by the Celtic saint Deiniol in the early 6th century AD. 'Bangor' itself is an old Welsh word for a wattled enclosure,[1] such as the one that originally surrounded the cathedral site. The present cathedral is a somewhat more recent building and has been extensively modified throughout the centuries. While the building itself is not the oldest, and certainly not the biggest, the bishopric of Bangor is one of the oldest in the UK.
In 973, Iago, ruler of the Kingdom of Gwynedd, was usurped by Hywel, and requested help from Edgar, King of England, to restore his position. Edgar, with an army went to Bangor, and encouraged both Iago and Hywel to share the leadership of the realm. Asserting overall control however, Edgar confirmed liberties and endowments of the Bishop of Bangor, granting land and gifts. From 1284 until the 15th century, Bangor bishops were granted several charters permitting them to hold fairs[2] and govern the settlement, later ones also confirming them as Lord of the Manor.[3]
Bangor remained a small settlement until the start of the 18th century, when a political desire to enhance communications between England and Ireland via the London-Holyhead-Dublin corridor saw it designated as a post town in 1718.[3] Growth was spurred by slate mining at nearby Bethesda, beginning in the 1770s by Richard Pennant, becoming one of the largest slate quarries in the world. The route between London and Holyhead was much improved by Thomas Telford building the A5 road, which runs through the centre of the city and over the Menai Suspension Bridge which was also completed by him in 1826. Bangor railway station opened in 1848.
A parliamentary borough was created in 1832 for Bangor, becoming a contributing Caernarfon out borough as its status grew due to further industry such as shipbuilding[4] as well as travel, not just from Telford's road, but through tourism mainly from Liverpool via steamboat.[5] It was also an ancient borough from earlier privileges granted to Bangor in medieval times,[6] but an 1835 government report investigating municipal corporations concluded that this status was defunct and in name only.[7] The borough was reformed in 1883 into a municipal borough.
Friars School was founded as a free grammar school in 1557, and the University College of North Wales (later Bangor University) was founded in 1884. In 1877, the former HMS Clio became a school ship, moored on the Menai Strait at Bangor, and had 260 pupils. Closed after the end of hostilities of World War I, she was sold for scrap and broken up in 1919.
In World War II, parts of the BBC evacuated to Bangor during the worst of the Blitz.[8] The BBC continue to maintain facilities in the city (see Media).
21st century
In 2012, Bangor was the first ever city in the UK to impose, throughout its city centre, a night-time curfew on under-16s. The six-month trial was brought in by Gwynedd Council and North Wales police, but opposed by civil rights groups.[9]
In 2021, Owen Hurcum was unanimously elected as mayor, making history as the youngest-ever mayor in Wales at 22, as well as the first ever non-binary mayor of any UK city.[10]
