Credit Research Foundation's
Glossary of Business, Accounting, Legal, Financial, Administrative, Operational and Technological Words and Phrases
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Credit Matters - selections from the Credit Research Foundation library
The following files under this heading are mainly PDF files and require Adobe Acrobat Reader to view them. Some of the files are Microsoft Word documents. If you experience difficulty downloading, right click on the document and save it on your hard drive, then open in MS Word.
The international accounting standards are known as International Financial Reporting Standards or IFRS. In this CRF article entitled, "Bridging the GAAP to IFRS" just exactly what is IFRS and how it differs from GAAP is outlined along with, among other issues, the advantages and challenges in switching accounting systems from GAAP to IFRS. The article also offers some good advice on what companies should do to prepare for the transition from GAAP to IFRS.
Collection Productivity: Transferring Effort into Dollars
Productivity is a measure of the rate at which outputs of goods and services are produced per unit of input. It is calculated as the ratio of the quantity of outputs produced to some measure of the quantity of inputs used.
Productivity measures are used at the level of firms, industries and entire economies.
Productivity is a 'supply-side' measure, capturing technical production relationships between inputs and outputs; but, implicitly, it is also about the production of goods and services that are desired, valued and in demand.
At a very broad level, productivity measures are often used to indicate the capacity of a business to harness its human and physical resources to generate economic growth.
Accounts receivable collection productivity growth is a key source of value you can add to your company. Collection productivity growth means more value is added in the collection process and this means more income is available to be distributed. A/R collection productivity growth is important to the firm because it means that it can meet its obligations to its customers, workers, shareholders and governments (taxes and regulation), and still remain competitive or even improve its competitiveness in the market place.
The Credit Professional's Duty And Protection With Disclosing Corporate Fraud At The Public Company
The Sarbanes Oxley Act (SOA) requires more accurate financial disclosure and reporting from public companies. Under the "who-killed-the-company" investigation and prosecution, the Justice Department and SEC are pursuing corporate fraud charges against officers with zeal.
Prosecutors are indicting middle management level employees allegedly enmeshed in the fraudulent reporting so as to assist in building corporate fraud cases against senior executives. For example, employees have been accused of making adjustments to WorldCom's financial ledgers to misstate its financial condition.
SOA was adopted to combat the wave of fraudulent accounting and financial reporting scandals and corporate bankruptcies. It focuses on the conduct of corporate officers and public accounting firms and adequate disclosure in public company financial statements. All financial information must accurately present the company's financial conditions and results of operation for the period.
Forfaiting A User's Guide - What It Is, Who Uses It And Why?
Italian and West German exporters have long been familiar with Forfaiting and still provide the bulk of the market. UK, Scandinavian, Spanish and French exporters are latching onto the possibilities of the technique with enthusiasm. The American and Canadians, meanwhile, have been slow to catch on (some Forfaiters think it is because they are suspicious of its simplicity coupled with a lack of complex documentation).
For people who are not using the technique, this is a concise introduction to Forfaiting using questions those new to the technique would typically ask.
Attaining Process Value: A Checklist for Enhancing the Value of Credit and Receivables Management
The key to attainment of market leadership is to raise the bar within the organization through the creation of value at all levels. A successful effort in achieving this objective must include several organizational characteristics. The firm must have a process orientation and look at its processes from end to end.
The Process of Reengineering Collections
Using automation to help reengineer the collection process has resulted in breakthrough performance gains commensurate with traditional measures such as days sales outstanding (DSO). One of the reasons the improvements have been so great is that the challenges are so formidable. Recognizing these challenges is the first step toward formulating a solution. Critical to an effective solution is a comprehensive reengineering and automation strategy.
Network Issues and Payment Systems
Networks play an integral part in the production and consumption of certain goods and services, including transportation, communications, and payment systems. A network good or service has two main characteristics: the value a person gets from the product increases as more people consume it and the technique a firm chooses to produce the product will depend on techniques chosen by other firms.
Managing Organizational Change
The increased pace of change that many of us have encountered over the past ten years has been dramatic. During the late 1980s, many of us were grappling with issues that we had never encountered. The accelerated use of leverage as a means of increasing shareholder wealth left the balance sheet of some of America's finest organizations in disarray.
Making Payments on the Internet
The Internet has begun to make the idealized marketplace discussed in economic textbooks seem more plausible. It allows low-cost, speedy, convenient, and informative communication across the world. However, to become an active market in goods and services the Internet must be devised for buyers and sellers to securely and conveniently exchange payment over the Internet.
Gaining an Understanding of Your Customers Using Portfolio Analysis
To successfully manage a process, you must control and measure that process. To manage the credit process, today's credit executive must go beyond traditional "customer" analysis and move to analysis of the entire receivables portfolio. This is as true for the management of the accounts receivable portfolio as it is for the production of any goods or services.
Dollars and Sense: Evaluating Remittance Processing Software
Rather than relegate unmatched cash receipts to your A/R's re-work file, remittance processing software uses a customized battery of sophisticated matching algorithms to identify exactly what the customer is paying and then automatically process any needed credit or debit memos to finish the job. Without detailed system knowledge, it is difficult to recognize all the manual tasks an auto-remit application must replace in order to maximize cost saving and efficiency benefits.
Economic Value Added: The Invisible Hand at Work
Economic Value Added (EVA) is a measurement tool that provides a clear picture of whether a business is creating or destroying shareholder wealth. EVA measures the firm's ability to earn more than the true cost of capital. EVA combines the concept of residual income with the idea that all capital has a cost, which means that it is a measure of the profit that remains after earning a required rate of return on capital. If a firm's earnings exceed the true cost of capital it is creating wealth for its shareholders.
Defending Preference Claims: What's Mine is Mine - What's Yours is Negotiable
This article discusses practical strategies for trade creditors who receive preference demand letters. It first reviews the basic preference law and defenses. Next, it discusses the different parties who may be responsible for collecting preferences, and finally, it outlines practical strategies for trade creditors to use when defending preference claims.
Consignment Risks: A Creditor's Perspective
Consignment sales can help minimize the risk of non-payment, and can be a desirable way of doing business with a retailer or wholesaler on shaky economic grounds.
Identifying Bankruptcy Fraud
The bankruptcy system is based on the theory that a debtor will make full disclosure of all assets and liabilities so that the final disposition is in accordance with the requirements of the law. Unfortunately, at times both debtors and creditors try to obtain more than they are entitled to under the Bankruptcy Code. There are a number of criminal statutes that prohibit this type conduct.
Accurately and Efficiently Measuring Individual Account Credit Risk On Existing Portfolios
Behavior Scoring Models are statistical based credit scoring models specifically designed to evaluate creditworthiness of existing customers. Behavior Scoring Models are derived from a statistical analysis of individual account credit performance. The purpose of the statistical analysis is to find the most predictive set of data elements that separate the good credit risks from the bad credit risks.
A Practical Solution for Doing More With Less
Artificial intelligence (AI) is the science of making machines "intelligent" or, to act, as we would expect people to act. Today in American business, this science assumes increasing responsibility as work forces change and managers are forced to do more with less. AI is a set of very powerful business tools that can be used to solve business problems.
Performance Measurement - an Executive Overview
Most organizations have already recognized that their strategic objectives are not purely financial in nature. And, even if they are primarily financial, the organization that ignores key 'non-financial' performance areas can be fairly certain that it will not achieve its long-term financial objectives.
Reducing the Cash Gap by Factoring
Growing firms often find themselves strapped for money. A gap in cash is created when bills are paid weeks before cash comes in from customers. The cash gap can be shortened by concentrating efforts on fast moving inventory, implementing a just-in-time inventory model, negotiating extended credit terms to suppliers, and getting cash out of customers through discount programs and credit card transactions. Only after exhausting these alternatives does factoring typically make sense.
E-Commerce Demands a Dynamic Settlement Process
E-commerce enterprises are quietly automating their settlement processing. In the business-to-consumer world, credit cards are proving to be the preferred method of payment. In the business-to-business environment, credit cards, usually in the form of purchasing cards (p-cards), are an acceptable payment medium for only a small portion of the marketplace. The challenge for B2B companies has been to cost effectively automate their settlement processing. In order to thoroughly understand the dynamics involved in moving from manual cash applications to automated processes, it is essential that the different types of costs involved in remittance processing, no matter what the technology, be first understood.
Links to other relevant references:
Check 21 Information provided by NACHA - The Electronic Payment Association
The Check Clearing for the 21st Century Act (Check 21 Act) facilitates significant change in the way checks are processed in the United States. All banks will be affected by this law even if they do nothing to change their current check processing operations. All customers (consumers and businesses) are affected by the Check 21 Act in that they have the potential to receive a substitute check.
To help educate customers, and to help train bank staff, the financial services industry associations have come together and developed this Resource Document that contains an overview of Check 21, common terms with definitions, examples of substitute checks, where substitute checks will be found and a list of industry resources. Using common material such as the information in this document will help reduce customer confusion.
Check 21 Will Lead to Savings of Time, Money
By William Poole
Any kinks can be worked out, just as they were with credit cards, debit cards, ACH and other forms of electronic payments. In the end, check imaging will lead to a more-efficient payments system, which is good for the economy overall.
Common questions about Recessions
Understanding recessions and their effect on the economy is an important element in credit management. The following information is provided by the National Bureau of Economic Research (NBER). The NBER is a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of how the economy works.
Electronic Invoice Presentment and Payment (EIPP). The information in the following two documents is designed for billers, payers, financial institutions, technology providers and other industry participants.
Part One - Electronic Invoice Presentment and Payment (EIPP) Presentment Models. Electronic Invoice Presentment and Payment (EIPP) - the process by which companies present invoices and make payments to one another through the Internet - is a promising tool in the business-to-business (B2B) environment that has not yet achieved significant adoption rates. This file appears as written in the CRF journal, The Credit and Financial Management Review.
Part Two - This is the second of a two-part paper entitled Business-to-Business EIPP: Presentment Models and Payment Options. Part two covers the business-to-business payment options that can be incorporated into EIPP. The purpose of the document is to provide an objective, educational tool about Internet-based EIPP in business-to-business transactions. It is intended to help businesses understand the options currently available in the market. The authors believe that broader understanding will help drive adoption of EIPP.
Commercial Law League of America
For those seeking information about commercial law professionals, the CLLA now makes it easy to identify those who provide competent, quality collections and insolvency service. All members of the CLLA subscribe to either the Code of Professional Responsibility or to the Code of Ethics and the Declaration of Fair Practices.
The Commercial Collection Agency Association
If you want to ensure that your collection agency is certified, visit this site. With over 120 member agencies, the CCAA represents the most prestigious commercial collection agencies in the United States. The CCAA works to elevate the standards of the commercial collections industry by providing educational, legislative, promotional and administrative services to its members.
Commercial Law Industry Terminology
Many legal terms used in the art and science of credit and collection.
Mechanics Lien Laws State by State Database of Lien Laws
Mechanic's Lien Laws have been enacted to protect those furnishing labor, material, and/or equipment for the improvement of real property. Lien Laws have been enacted in all 50 states and differ widely.
United States Code
The Code is a consolidation and codification by subject matter of the general and permanent laws of the United States. This version is generated from the most recent version made available by the US House of Representatives. Of particular interest to creditors is Title 11of the US Code or the rules of Bankruptcy...see next...
Title 11of the US Code the Rules of Bankruptcy
Also see: Bankruptcy Basics from the US Courts
Uniform Commercial Code
The underlying purposes and policies of this Act are to simplify, clarify and modernize the law governing commercial transactions; to permit the continued expansion of commercial practices through custom, usage and agreement of the parties and to make uniform the law among the various jurisdictions.
Fair Credit Reporting
The Fair Credit Reporting Act (FCRA), enforced by the Federal Trade Commission, is designed to promote accuracy and ensure the privacy of the information used in consumer reports. Here are some questions consumers commonly ask about consumer reports and Credit Reporting Agencies.
Equal Credit Opportunity
This information advises you of ways to ensure non-discriminatory practices in the process of credit extension.
Proposed Rule changes to the ECO
Fair Debt Collection
This information answers commonly asked questions about your rights under the Fair Debt Collection Practices Act.
Protecting Confidential Information
Confidentiality is a legal principle that maintains secrecy between parties. This is particularly important when you wish to ensure that your information, knowledge or research results which you may pass to another party are held in confidence and not used improperly. This document helps explain confidentiality and your responsibilities and what you can do to protect yourself.
Glossary of Electronic Data Interchange Terms
Fundamental Facts About U.S. Money
A primer of interesting background information about money.
Automated Clearing Houses (ACH)
The Automated Clearing House (ACH) payments system was designed to allow corporations and consumers to reduce or eliminate the use of paper checks to make routine payments.
Summary of Collection Laws
State listing of interest rates, statute of limitations, bad check laws, general garnishment exemptions, and collection agency bond and license requirements.
A Plain English Guide to Antitrust Laws
The FTC has prepared this information to help you understand the antitrust laws -- how they can benefit consumers, and how they can affect you in your business operations.
Points of Interest - Understanding Interest
To understand the economic forces that drive (and sometimes are driven by) interest rates, we first need to define interest rates. An interest rate is a price, and like any other price, it relates to a transaction or the transfer of a good or service between a buyer and a seller.
About Bankruptcy & the U.S. Trustee Program
The United States Trustee Program is a component of the Department of Justice that seeks to promote the efficiency and protect the integrity of the Federal bankruptcy system.