Credit control and charity research Essay Example | Topics and Well Written Essays - 1750 words

Credit control and charity research - Essay Example The supplier`s background is unknown to RTE and so there is huge risk involved in making the payment early. What if payment is not done, supplier waives off from his liability, the goods promised are not provided? The above questions are examples of financial risk that the company features. To reduce financial risk RTE can do a credit check on the customer’s financial history. To verify credit worthiness these are checks on the customers financial position (Gruening, 2000). To see whether a party is capable enough of making the loan payments, these checks are carried prior to accepting loan requests. Credit Bureaus run these credit checks and to verify financial data, various financial institutions are contacted. The company`s credit score is then a measure of the company’s credit worthiness – and therefore a low credit score means high financial risk. To reduce their financial risk RTE can make use of references that are provided to them by customers. The mechanism is simple. A list of references is exchanged at or before the contract .Reference is one who confirms that the details provided by a particular person are legal or not. Verifying the details by all references prior to making the payment can actually minimize Regeneration Through Charity Limited`s exposure to financial risk. By this they will not expose themselves by paying anything that should not be paid. A true picture of the supplier can be obtained as the references are often people and companies with good reputation (Weiss, 2000). Other option on hand to the company to reduce financial risk is negotiating. In the current case the supplier asks for fifty percent initial payment. New terms can be set between RTE and supplier which are beneficial to RTE. There is an option that the supplier might agree to lower the initial amount of payment to be made if the overall contract price is increased by a little margin.