Abstract
M.Com. (Business Management)
The provision of trade credit in the course of business is one of the accepted norms of
most business operations providing higher sales volumes, but also, a certain degree of
risk.
As part of the credit manager's responsibilities he/she must manage the credit department
in such a way as to limit the extent of the inherent risk associated with trade credit
thereby maximising the marginal profit flowing from credit transactions. Traditional
management strategies and techniques do not take into consideration the level of the
country's economic activity, to their peril.
From the retail trader (Communicomp) example, it is clear that effective credit
management procedures and well trained personnel are crucial to the management of
trade credit. It is also noted that during a stage of lower economic activity the risks
associated with the provision of trade credit are higher, and more likely to realise a
financial loss whilst impacting negatively on cash flow.
It is therefore appropriate that credit managers, should in future, adopt a management
style which takes into consideration the state of the country's economic activity. This
would ensure that the risks associated with providing trade credit is kept within
acceptable limits.