Examples of Letter of refusal of granting credit to a new customer
Howard Ltd
Address

Name
Company Name

Dir Sir
RE: Request for credit facilities

Thank you for your enquiry regarding the provision of credit facilities by us for £5,000 of credit on 30 day terms. We have taken up your trade references and examined your latest set of financial statements.

Explanation
1) We are unfortunately concerned about your level of profitability in the most recent year and also have some concerns about one of the trade references from Barnaby.

2) We have some concerns about your level of profitability and would like the opportunity to examine your SOFP and SOPL for the two previous years. As one of your trade references has only been trading with you for two months, we would request details of a further supplier that we could contact for a trade reference.

3) We have some concerns about offering credit at this early stage of your business as there are, as yet, no financial statements for your business that we can examine.

Conclusion
1) On balance we are not in a position to grant your request for trade credit at the current time, although we would of course be delighted to trade with you on a cash basis. If you do not to wish to trade on this basis and would like to enquire about credit terms in the future then we would be delighted to examine your current years financial statements when they are available
2) At this stage I am unable to confirm whether we can provide you with a credit facility but will reconsider the situation when we receive your financial statements and additional trade reference.
3) Therefore, at this stage I am unable to confirm whether we can provide you with credit facilities. We would of course be delighted to trade with you on a cash basis until we have had an opportunity to examine your first year`s trading figures. Therefore, please send us a copy of your first year financial statements when they are available.

Thank you for your interest in our company.

Yours faithfully

XYZ

Credit manager

Dear Sir,

RE: Request for credit facilities

Thank you for your enquiry regarding the provision of credit facilities by us for £5,000 of credit on 30 day terms. We have taken up your trade references and examined your latest set of financial statements.

Although your references are satisfactory, we have some concerns about your profitability and liquidity. Clearly, your overall profitability and liquidity position have improved since 2012 but their levels are still lower than we would normally accept in order to grant credit facility.

However, due to your bank and trade references, we would be happy to offer you credit facility for six months at the end of which period the movement on your account would be reviewed and the position re-assessed. The credit limit that we could offer would initially be £2000 and the payment terms would be strictly 30 days from the invoice date.

Thank you for your interest in our company and we look forward to trading with you on the basis set out above.

Yours faithfully

XYZ

Credit manager

Reminder letter

Dear Sir,

Further to our invoices detailed below, I do not appear to have received payment.
I trust that this is an oversight and that you will arrange for immediate payment to be made. If you are wiholding payment for any reason, please contact me urgently and I will be pleased to assist you.

Invoice no. Terms Due date Amount

If you have already made payment please advise me and accept my apology for having troubled you.

Your faithfully

Task 5 Credit limit assessment analysis
ABC Ltd Performance Indicators analysis:

1) Revenue has increased by 20%
2) Operating profit margin has decreased
3) Gross profit margin has also declined (2010-25%, 2009-40%)
4) Inventory levels have increased by 100% from 2010 to 2011 and the holding period has increased by 16 days
5) Trade receivables have increased by over 50% from 2010 to 2011 and the collection period