Controls for the Credit Department (#3)

In this episode, we discuss the controls associated with both a manual and computerized credit department. The main control points and related topics noted in the episode are:

  • How the entire credit department acts as a giant control over credit

  • The use of a credit application form for larger credit requests

  • The review process for credit requests

  • The use of an approval stamp on sales orders to indicate department approval

  • Why sales orders should be locked up in the credit department, to prevent the unauthorized stamping of sales orders as having been approved

  • The use of a policy for the warehouse not to ship orders unless an approval stamp is present

  • The need for a formalized credit policy, with collections goals and credit granting rules

  • The need for ongoing staff training in how to grant credit to customers

  • Why the credit staff should investigate unanswered questions on the credit application

  • The use of the credit limit field in the accounting software

  • The need for a periodic review of credit limits, which may also be triggered by certain events

  • The need to access third party credit reports

  • The use of an online credit application on the company website

  • The use of automated decision tables to grant credit to customers

Related Courses

Accounting Controls Guidebook
Accounting Information Systems
Credit and Collection Guidebook