Definition of Credit control:
Credit control, also called credit policy, includes the strategies employed by businesses to accelerate sales of products or services through the extension of credit to potential customers or clients. At its most basic level, businesses prefer to extend credit to those with “good” credit and limit credit to those with “weak” credit, or possibly even a history of delinquency. Credit control might also be called credit management, depending on the scenario under review.
A business's success or failure primarily depends on the demand for products or services. As a rule of thumb, higher sales lead to bigger profits, which in turn leads to higher stock prices. Sales, a clear metric in generating business success, in turn, depends on several factors. Some, like the health of the economy, are exogenous, or out of the company’s control, other factors are under a company’s control. These major controllable factors include sales prices, product quality, advertising, and the firm’s control of credit through its credit policy.
Activity aimed at serving the dual purpose of (1) increasing sales revenue by extending credit to customers who are deemed a good credit risk, and (2) minimizing risk of loss from bad debts by restricting or denying credit to customers who are not a good credit risk.
Effectiveness of credit control lies in procedures employed for judging a prospects creditworthiness, rather than in procedures used in extracting the owed money. Also called credit management.
How to use Credit control in a sentence?
- Credit control focuses on the following areas: credit period, cash discounts, credit standards, and collection policy.
- Credit control is a business strategy that promotes the selling of goods or services by extending credit to customers.
- Most businesses try to extend credit to customers with a good credit history so as to ensure payment of the goods or services.
- Companies draft credit control policies that are either restrictive, moderate, or liberal.
Meaning of Credit control & Credit control Definition