Question

What is a typical procedure for processing sales orders from new customers or customers making a purchase that causes their credit limit to be exceeded?

O General authorization to approve the order is given to sales clerks
O Specific authorization must be granted by the credit manager
O The sale should be rejected
O The sales clerk should order a report from a .credit bureau before approving the order

Answer 1

When processing orders for new customers or customers exceeding their credit limit, a specific authorization from the credit manager is required. This is because a credit card is considered a short-term loan, and without careful risk assessment, the company could face financial losses. The credit manager's role is to balance maintaining sales while ensuring the financial stability of the company.

Step-by-step explanation:

The typical procedure for processing sales orders from new customers or customers making a purchase that causes their credit limit to be exceeded usually involves a specific authorization process. When a sales order is placed by a new customer or by an existing customer who is exceeding their credit limit, the transaction poses a credit risk to the company. To mitigate this risk, specific authorization must be granted by the credit manager before the order can be approved. This is because a credit card operates as a short-term loan, with money initially being transferred from the credit card company's account to the seller, which at the end of the month becomes debt the cardholder owes to the credit card company.

Granting general authorization to sales clerks typically would not be advisable as they may not be equipped to assess credit risk appropriately. Similarly, rejecting the sale outright may not be ideal as each customer's financial circumstances could vary, and a potential opportunity might be missed. However, it is important to handle these situations with caution to avoid extending credit that could result in nonpayment. Therefore, entrusting the decision to a credit manager who can evaluate the specific risks and make an informed decision is generally seen as the best approach to balancing sales and financial stability.

Obtaining a report from a credit bureau before approving the order could be part of the credit manager's due diligence process, although this might not be practical or necessary for every transaction. Each business will have its own policies and procedures based on their risk tolerance, customer relationship management, and operational efficiency.

Answer 2

For new customers or those exceeding their credit limit, specific authorization by a credit manager is typically required before processing sales orders. This is to assess credit risk and maintain financial stability for the business. The correct answer is The credit manager must grant specific authorization.

Step-by-step explanation:

The procedure for processing sales orders from new customers or customers exceeding their credit limit typically involves a review of the customer's creditworthiness before authorizing the sale. When a credit card is used for a purchase, the money is immediately transferred from the credit card company's checking account to the seller, thus the credit card acts as a short-term loan to the user.

In a business environment, when a new customer places an order, or an existing customer exceeds their credit limit, it is common practice for specific authorization to be granted by a credit manager. The sales clerk would need permission to proceed with the order. This is because providing goods or services to an individual or company without a clear understanding of their ability to pay can be risky for the business.

In cases where specific authorization is required, the credit manager would assess the risk involved with the order, and may consider factors such as the customer's payment history, credit score, or overall financial stability. This could also involve ordering a report from a credit bureau, although this is not the initial responsibility of the sales clerk. The goal of this process is to mitigate financial risk while still maintaining good customer relations and securing potential sales. In conclusion, the specific authorization by the credit manager is the general procedure for new customers or those who are about to exceed their limit on sales orders.