SHOW & CHAPTER 33: RISK AND CREDIT MANAGEMENT - WILLIAM EASTMAN

The major benefit of integrated, quantitative credit risk management is to reduce revenue losses. Monitoring your credit risk allows your executive management team to understand which potential clients may come at too high a risk and above your pre-identified risk tolerance.

EPISODE 153: Summary
There are many types of risk in a business. Although the conversation almost always focuses on customers, in reality it is a review of the entire organization where the risks are positive and negative. Positive risks are the lost opportunity costs for focusing on the wrong customers or promoting the wrong offer. Negative risks are those things that will harm or kill the company.

We manage risks in business not to prevent risk, but to determine which to take or avoid through the prism of working capital and earnings. Today our focus is going to be on the marketing and sales areas leaving the other areas for operations.

Credit risk is where most small businesses operate. If correctly identified and managed, it can be leveraged as a strategic opportunity. Through effective credit risk management your business is able to greatly improve overall performance and secure a competitive advantage.

Topics:

• The Nature of Types of Risks
• Managing Credit Risks
• Self-Financing Customers

EPISODE 154: The Nature and Types of Risk
Business risk is the possibilities a company will have lower than anticipated profits or experience a loss rather than taking a profit. Business risk is influenced by numerous factors, including sales volume, per-unit price, input costs, competition, and the overall economic climate and government regulations.

Topics:

• Sources
  • Natural
  • Human
  • Economic
  • Physical
• Insurable vs Uninsurable Risks
• Risk Appetite vs Risk Tolerance
• Risk Minimization

EPISODE 155: Managing Credit Risk
Checking credit scores, standardizing credit terms, maintaining good relationships and the process for dealing with overdue accounts are all part of risk & credit management.

Topics:

• Business Credit
  • Register and get a DUNS Number
  • Use only accounts that report
  • Get a business card
  • Monitor your score
• Customer Credit
  • Competitive Advantage
  • Increase sales
  • Improve customer relationships
  • Establish Credit Policy
    • Credit Limit
    • Credit Terms
    • Collection Methods

EPISODE 156: Self Financing Customers
Customer financing lets customers enroll in a payment plan to buy goods or services. Similar to a credit card, the merchant receives full payment upfront. The customer receives the item right away, but pays over time. The customer is typically charged interest on the financing, and the merchant might have to pay a small fee for each financed transaction.

Topics:

• ​Inhouse or third party?
• BNPL (Buy Now - Pay Later) Key Questions
  • Can your customers qualify?
  • What are the spending requirements?
  • Will customers use it?
  • What does it cost you? Impact on margins?
• Global Players
  • PayPal
  • ViaBill
  • Klarna
  • Afterpay
• Integrate with eCommerce platforms
• Part of your advertizing and marketing

Next Show/Chapter 37: Cash Flow Forecasting
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