question archive Steve Jones is the 35-year-old owner of a highly competitive small business that supplies temporary office help
Steve Jones is the 35-year-old owner of a highly competitive small business that supplies temporary office help
Subject:ManagementPrice:3.87 Bought7
Steve Jones is the 35-year-old owner of a highly competitive small business that supplies temporary office help. Like most business people, he is always looking for ways to increase profit. However, the nature of his competition makes it very difficult to raise prices for the temps’ services, while reducing their wages makes recruiting difficult. Jones has, nevertheless, found an area—bad debts—in which improvement should increase profits. A friend and business consultant met with Jones to advise him on credit management policies. Jones was pleased to get this friend’s advice, as bad debts were costing him about 2 percent of sales. Currently, Jones has no system for managing credit.
1. What advice would you give Jones regarding the screening of new credit customers?
2. What action should Jones take to encourage current credit customers to pay their debts? Be specific.
3. Jones has considered eliminating credit sales. What are the possible consequences of this decision?
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Answer 1= In order to screen the new credit customers, the following information can be analyzed about the customers=
The past payment history of the customers with the other suppliers of the services.
The financial stability of the customers as it will ensure that whether the customer has the required financial capabilities.
Assessment of the assets and liabilities incurring to the customers
Answer 2= in order to motivate the current credit customers to pay their debts, Jones can come up with a discount policy in which he can provide some discount to the customers who return the debts within a certain period of time. This policy can bee on the basis of time and also on the basis of the money value.
For example=
If debts are paid 75% of total= 10% discounts
If debts are paid 100% of total= 15% discounts
If debts are paid within a week= 20% discounts
If debts are paid within a month= 10% discounts
Answer 3= There may be one positive and one negative result of zero credit service. The positive aspect will be to overcome the issue of the bad debts while the negative aspect may result in the loss of sales of those customers who buy the services on a credit
