Credit policy for a large labour supply company
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Client
A large labour supply company operating in the UAE that caters to medium to large construction
contractors.
Assignment
Approach
Benefits to the client
Bottomline
In the wake of losses due to delinquency of several customers, our client wanted us to develop credit policies and procedures to deliver on two apparently conflicting objectives: controlling credit risk while having a business-friendly credit policy.
1. Designed a system comprising the credit policy document, credit application, assessment criteria and simplified procedures to administer these elements,
2. Developed criteria to assess customers’ creditworthiness from a liquidity and solvency
perspective and the application methodology,
3. Developed a mapping table to assign credit limits based on the credit assessment,
4. Handheld the client in implementing the above credit system, especially as regards the scoring & limit mapping methodology.
1. The element of subjectivity implicit in ad hoc credit decisions was replaced by an objective system with an audit trail.
2. With a policy in place, our client was able to delegate credit decisions to the financial administration.
Credit losses have since reduced to a negligible level.