CCP Foundation Level
Credit Management glossary
Every term this guide defines, A to Z, each with the chapter that teaches it. Open it when a word in a question is unfamiliar, and test yourself on it in the last week: cover the definition and say it in one sentence.
11 terms from the free first chapter
A
- A modern philosophy of credit
Today credit is treated as a legitimate, professionally managed function: not simply 'trust', but a disciplined process of assessing risk, setting terms, and monitoring performance, run by a dedicated credit department (see the chapter on the credit department) using structured analysis (see the chapter on credit assessment).
Taught in Introduction to credit management
- Ancient origins
Credit predates money itself: early Mesopotamian and Egyptian records show grain and livestock advanced against a future harvest, and Babylon's Code of Hammurabi (c. 1750 BC) already regulated interest and debt.
Taught in Introduction to credit management
C
- Consumer credit
Credit extended to individuals for personal, household or consumption purposes, covered in full in the chapter on consumer credit.
Taught in Introduction to credit management
- Cost of credit
Extending credit is not free to the creditor: it ties up working capital that could otherwise be invested or used elsewhere, and carries the direct cost of assessing, administering and collecting the facility.
Taught in Introduction to credit management
E
- Export credit
Credit extended in connection with the sale of goods or services across international borders, covered in full in the chapter on export credit.
Taught in Introduction to credit management
O
- Overdue accounts and cash flow
Extending credit converts a cash sale into a receivable, delaying the cash inflow; the longer accounts run overdue beyond agreed terms, the more a business's actual cash flow diverges from its reported sales, which is why cash flow, not just profit, is watched closely wherever credit is a large part of the business.
Taught in Introduction to credit management
- Overdue accounts and liquidity
Money owed but not yet received cannot be used to pay the business's own suppliers, wages or loan instalments, so a build-up of overdue debtors is a direct threat to a business's ability to meet its own obligations as they fall due.
Taught in Introduction to credit management
- Overdue accounts and profit
An overdue account that is never collected becomes a bad debt, a direct charge against profit; even one that is eventually collected late has already cost the business through the provisioning it required in the meantime (see provisioning in the chapter on debt collection).
Taught in Introduction to credit management
T
- The Greek experience
Ancient Greek trade extended credit between merchants across city-states and, through maritime loans that funded a voyage against repayment (plus a premium) only if the ship returned safely, an early form of risk-priced lending.
Taught in Introduction to credit management
- The Reformation
Medieval Christian doctrine treated charging interest (usury) as sinful, which restricted formal lending. The Reformation's more permissive view of interest, alongside the growth of European trade, helped commercial credit and banking develop into recognisably modern forms from the 16th century onward.
Taught in Introduction to credit management
- Trade credit
Credit extended between businesses in the course of trade, typically supplier to buyer, covered in full in the chapter on trade credit.
Taught in Introduction to credit management
The full glossary adds every term from the other 11 chapters, A to Z, each with the chapter that teaches it.