In this issue:


HR Management

Salary Index 2009

Family Friendly
Employment Practices

Making an Employee Redundant

Payroll Outsourcing

Personnel Leasing

Statutory Holidays in 2009:

- China
- Hong Kong
- Japan
- Malaysia
- Singapore
- Taiwan

Corporate Training

The Focus

Public Seminar

Case Analyzes

Credit Management

AR Assessment Tool

Cost of Bad Debt

What Should We Do

Contact US































What Should We Do
– Part I
Written by Andy Li CM MCCMA

For preventing the cost of slow payment and bad debt, we should maintain a comprehensively credit control. A comprehensively credit control should include:

  1. Goals;
  2. Accountability;
  3. Terms and conditions of sales;
  4. Credit approval procedure;
  5. Monitoring and reporting procedure;
  6. Training.


The enterprise should be an up the goal for their credit control. It should be better if have two or three good goals and achieve them rather than put up a long list and miss most of them. Before set up the goal, we should review the current account receivable situation, for example:

The current situation of ABC Company Limited as showed:

Current $885,000.00 59%
0-30 days $225,000.00 15%
31-60 days $150,000.00 10%
61-90 days $120,000.00 8%
91-180 days $60,000.00 4%
181-365 days $45,000.00 3%
Over 365 days $15,000.00 1%
Total 1,500,000.00 100%

DSO is 28.5 days; bad debt written off is 2% of annual turnover.

The goal of ABC Company Limited may be:

  1. Achieve a DSO of less than 27 days in the first quarter;
  2. Reduce bad debt write-offs to 1% of annual turnover;
  3. Deduct 3% pass due in the column 61-90 days, 4% pass due in the column 31-60 days and 7% pass due in the column 0-30 days.


The enterprise should state clear the responsibility and authority to each related personnel. For example:


Approval Limitation

Credit Clerk / Assistant

Up to HK$10,000.00

Credit Supervisor

Up to HK$50,000.00

Credit Manager

Up to HK$100,000.00

Credit Director

Over HK$100,000.00

Terms and conditions of sales

We should state clearly the standard terms and conditions that will offer to the client, such as 2% 10 Net 30. The policy will state whether these terms can be negotiable, if yes, it is necessary to clearly state who have authority for accepting the negotiated terms. When drafting this section, we should state clear:

Detail terms and conditions of sale;

Credit approval procedure

This section is combined from two parts:

  1. New application; and
  2. Increase credit limit for existing client.

Before writing this section, we should be considers:

The sample Credit Application Form was presented here for your reference.

Monitoring and reporting procedure

This section will state clear the time line for the daily credit control activities such as schedule for monthly AR review meeting, performance review for the existing customer, the frequency of AR aging report and collection report generation, who should receive the reports etc.


Provide training to the related personnel for updating their collection skill and related ordinance.