Managing Customer Credit to Reduce the Company's Risk and Overdue Credits

Managing Customer Credit to Reduce the Company's Risk and Overdue Credits

Inês Lisboa (Polytechnic Institute of Leiria, Portugal), Teresa Costa (Polithecnic Institute of Setúbal, Portugal) and Nuno Teixeira (Polithecnic Institute of Setúbal, Portugal)
Copyright: © 2019 |Pages: 25
ISSN: 2327-3429|EISSN: 2327-3437|ISBN13: 9781522584797|ISBN10: 152258479X|EISBN13: 9781522584803
DOI: 10.4018/978-1-5225-8479-7.ch021
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MLA

Lisboa, Inês, Teresa Costa and Nuno Teixeira. "Managing Customer Credit to Reduce the Company's Risk and Overdue Credits." Handbook of Research on Entrepreneurship, Innovation, and Internationalization. IGI Global, 2019. 561-585. Web. 27 Mar. 2020. doi:10.4018/978-1-5225-8479-7.ch021

APA

Lisboa, I., Costa, T., & Teixeira, N. (2019). Managing Customer Credit to Reduce the Company's Risk and Overdue Credits. In N. Teixeira, T. Costa, & I. Lisboa (Eds.), Handbook of Research on Entrepreneurship, Innovation, and Internationalization (pp. 561-585). Hershey, PA: IGI Global. doi:10.4018/978-1-5225-8479-7.ch021

Chicago

Lisboa, Inês, Teresa Costa and Nuno Teixeira. "Managing Customer Credit to Reduce the Company's Risk and Overdue Credits." In Handbook of Research on Entrepreneurship, Innovation, and Internationalization, ed. Nuno Miguel Teixeira, Teresa Gomes da Costa and Inês Margarida Lisboa, 561-585 (2019), accessed March 27, 2020. doi:10.4018/978-1-5225-8479-7.ch021

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Abstract

Most companies give credit to customers when selling products or providing services. It has advantages as more customers may be willing to negotiate with the company, but it increases the company's risk. Therefore, the company must analyze the pros and cons of giving credit. This chapter summarizes all information needed for a company to establish credit policy for each customer or group of customers. First, credit risk and customers' credit risk are explained to call the attention to the need to manage it. Then it shows how a company can manage credit to maximize its value and reduce its risk. The inputs needed to determine a customer credit policy are explained. Credit risk models are presented. And finally, a recovery method to collect overdue credits is presented. This chapter aims the help the company to solve liquidity and solvency problems and to stablish long-term relationships with customers.

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