Credit Management
CREDIT MANAGEMENT & COLLECTION OF RECEIVABLES
DR. RICHARD MAYUNGBE
LAGOS, NIGERIA
26TH – 27TH OF JULY, 2010
INTRODUCTION
Nearly every writer on the subject has worked out his own definition of credit. The following writers are examples:
John Stuart in his Political Economy defines credit as the permission to use another’s capital.
Joseph French Johnson in Money and Currency calls credit the power to obtain goods and services by giving a promise to pay at a specified date in the future.
One of the most widely quoted definitions holds that credit is a present right to a future payment. In business therefore, credit is the trust given or taken in exchange for money, goods, or services but, Richard Mayungbe, one of Nigeria’s leading credit scholars defined credit as the granting of the purchasing power of one party to the other party for the purpose of creating wealth , but for a promise to pay back at an agreed future date.
Purchasing Power in this context refers to:
1. Cash
2. Movable Assets
3. Immovable Assets
4. Intangible Assets, i.e. goodwill, fame. Popularity etc
The essence of credit is to create wealth and expand or energise new economic activities through the deployment of resources from the surplus units to the deficit units of the economy.
CHARACTERISTICS OF CREDIT
Credit would typically have the following characteristics :
• Value -In monetary measurement
• Tenor – Period covered by the credit
• Price – Interest and other associated costs of the credit
• Purpose – Intended use for which the credit is meant
• Terms – Mutually binding conditions between the parties to the credit
TYPES OF CREDIT
Credit may be classified in many way but for our purpose, we shall classify it according to the type of credit transaction by which it is established:
Retail Credit – This falls into two categories ( Charge Account and
DR. RICHARD MAYUNGBE
LAGOS, NIGERIA
26TH – 27TH OF JULY, 2010
INTRODUCTION
Nearly every writer on the subject has worked out his own definition of credit. The following writers are examples:
John Stuart in his Political Economy defines credit as the permission to use another’s capital.
Joseph French Johnson in Money and Currency calls credit the power to obtain goods and services by giving a promise to pay at a specified date in the future.
One of the most widely quoted definitions holds that credit is a present right to a future payment. In business therefore, credit is the trust given or taken in exchange for money, goods, or services but, Richard Mayungbe, one of Nigeria’s leading credit scholars defined credit as the granting of the purchasing power of one party to the other party for the purpose of creating wealth , but for a promise to pay back at an agreed future date.
Purchasing Power in this context refers to:
1. Cash
2. Movable Assets
3. Immovable Assets
4. Intangible Assets, i.e. goodwill, fame. Popularity etc
The essence of credit is to create wealth and expand or energise new economic activities through the deployment of resources from the surplus units to the deficit units of the economy.
CHARACTERISTICS OF CREDIT
Credit would typically have the following characteristics :
• Value -In monetary measurement
• Tenor – Period covered by the credit
• Price – Interest and other associated costs of the credit
• Purpose – Intended use for which the credit is meant
• Terms – Mutually binding conditions between the parties to the credit
TYPES OF CREDIT
Credit may be classified in many way but for our purpose, we shall classify it according to the type of credit transaction by which it is established:
Retail Credit – This falls into two categories ( Charge Account and