STR'ATEOY CREDIT MANAGEMENT STRATEGIES FOR SMALL FIRMS Frederick C. Scherr West Virginia University ABSTRACT When a small finn sells goods or services to another firm, ir generally grants trade credit to tlie buyer fvr these purchases. While the academic and practitioner literature on credit management for large firms is voluminous, rhere is little in ibis literature which suggests appropriate credit invnagenient strategies, given the particular characteristics of the small finn. Set eral characteristics of small firms can lead to advantageous credit policies which are differenr from larger firms. Among these are rerurns-to-scale problems in adopting several credit management strategies, manogement which Iias limited erperrise iii finance, and resrricied access to ourside financiiig. In this paper, the effecrs vf these differences oii trade credit straregy are considered. Pour areas of credit strategy are analyzedi credit investigatioii arid risk assessment, credit-granting decisions, cvllectivns, and bearing credir risk. The paper Irresents and cririques trade credit policie~ for the sniall firinin each vf these areas, iiicluding pvlicy alternatives which invvlve the outsourcing vf one or niore aspects of credir management. INTRODUCTION When one business sells to another, the buyer typically purchases on trade credit. The accounts receivable created when trade credit is granted is a major asset for those small firms who sell to other businesses, and the selection of appropriate strategies for the management of these receivables can enhance the firm's chances of survival and growth. There is little in the litcraturc to guide the small firm's owner/manager in the selection of advantageous credit managcmcnt strategies. Articles in academic and practitioner small business journals usually outline the basics of credit management (for example, Atkinson, 1992; Knowles, 1989; and Faria, 1976) or descnbe the credit management methodologies used hy larger lirms, ignoring the imponant differences between large and small firms (for example, "Effective credit policics: Maximize sales and minimize bad debts," 1987). Further. texts in the linancial management of small 1mns tend to treat credit managcmcnt lightly, concentrating instead on the problems of raising funds and of evaluating capital investments.'n this 'or example, Walker and Petty, 1986, devote 10 pages to credit managcmem, 122 pages to raising funds (exclusive o( capital structure decisions, which are discussed separately), and 31 pages to capital hudgcting. 33 nonnativc paper. wc prcscnt some prescriptions I'or advantageous credit management strategies for small linns. drawing from the larger literature on credit managcmcnt I'or large lions and contrasting strategies between large and small. The paper deals cntircly with the granting of credit rather than the inanageinent of credit received I'rom other firins. CHARACTERISTICS OF SMALL FIRMS WHICH INFLUENCE CREDIT POLICY There are several differences between small firms anil large which make small I'irms'redit policy decisions unlike those of larger fiona. The I'irst crinccrns a rctuins-to-scale problem in employing inany credit managcmcnt icchniqucs. Crct)it inanagcmcnt strategy largely concerns thc control of credit-related costs. Two major types ol audit-rclatcd costs are had debt expense and accounts rcccivablc carrying costs, both ol'hich arc proportional to the dollar value ol'hc firm's receivables portfolio. Bad debt expcnsc rcprcscnts thc portion of'ccountsrcccivahle that go uncollcctcd because customers dcl'suit. Thc largm'hc accounts rcccivablc ponfolio, the greater thc number of such defaults and thc highm thc dollar bad debt expcnsc. Accounts receivable carrying costs rcprcscnt the time value of money for investmcnt in thc accounts receivable asset, and are coinputed as a required return times the dollar investment in accounts receivable. Thus, the larger the portfolio, thc greater arc accounts receivable carrying costs. (For morc discussion of these costs, sce Schcrr, 1989a, pp. 159-165.) Many credit strategies reduce these costs but rcquirc that the lirm bear other costs which arc lixctl in nature (a good exainple of this is thc hiring of a professional credit manager to make credit decisions). Since the receivables ponfolio of the small lirm is sinaller in dollar amount than that of the larger I'inn, the smaller lirm is at a returns-to-scale disadvantage in reducing bad debt and accounts receivable carrying costs by employing credit strategies entailing such I'ixcd costs (Mian & Smith, 1992). The second difl'ercnce concerns the expenisc ol'he small 1irm's owner/manager. The owner/manager's knowlcdgc is typically centered in the product or scrvicc sold. Few iiwncr/managers of small firms have thc level ol''inancial cxpcrtisc necessary to perl'orm thc type of'crctlit analysis undcrtakcn at large lmns. This is partly because owner/managers seem to firn) thc credit I'unction particularly distasteful and avoid it (Grahowsky, 1976). I.inally, hccausc of agency problems and problems in thc transmission of information and in monitoring thc firm, small linus will have higher costs of cxtcrnal capital than larger linus of the same business and Iinancial nsk. Owners of small limis have both a grcatcr ability to alter the I'inn to bcnclit themselves to the detriment of outside investors and a grcatcr incentive do so. Also, outside investors typically have less ability to assess thc risk ol'he small liim than thc larger finn bccausc the small finn does not gcneratc the plethora of audited linancial suucmcnts and other reports that larger firms do. Investors musi price these factors, and thus charge morc for funds. (See Pettit and Singer (1985) and Ang (1991/1992) for literature rcvicws of these and other differences in financing large and small firms.) The result is that, for small firms, internal cash liows arc by far thc least expensive source of'inancing; small lirms follow the pecking order I'inancing strategy dcscribcd by 34 Myers (1984). However, unlike external ltnancing, the amount of internal linancing available is lirniled, as it comes from the firm's cash f)ow stream. The result is a considerably greater concern for safeguarding the cash flow stream, a concern which needs io be manifest in the I'inn's credit policies. CREDIT STRATEGIES FOR SMALL FIRMS Mian and Smith (1992) define credit management as involving the I'ollowing I'unctions I. Credit investi ation and risk assessment: who performs this and how investigation and assessment are performed (what sources of information arc used, ctc.). C~dh i: h d id. hi h ppii" . k' 'i,h hi.d is suade, how much credit is granted, and thc terms under which credit is granted. 3. Collection: who perl'onus it and how it is to hc performed (what collection strategies arc lo bc used and the tnning ol'hcsc straicgies). ~a'»dk:hksh issih.»dr Thc selling finn has many altcrnativcs in managing each ol'hese I'unctions. These altcrnativcs arc of two general types. Thc lirst arc internal alternatives: dilfercnt ways of performing the lunction in-house. The second arc outsourcin alternatives: contracting out all or part ol'a particular function. Mian and Smith (l 992) consider thc outsourcing alternatives. They point out that thc outsourcing aspect of credit policy has lo do with the costs and risks of credit-granting and who bears these costs and nsks. The ltmi may choose to bear these or it may contract with an outside ugcnt, paying thc agent to bear them. Whether it is advantageous for thc lirm to do this depends on whether it has a comparative advantage in bearing the costs or risks itscll'. (That is, whcthcr it can do the job morc cheaply than an outsider.) The amount ol this comparative a&lvantagc, we will argue, is greatly affcctcd by thc characteristics ol'mall I'irms previously discussed. Mian and Smith reason that thc various institutional arrangements which sun'ound trade credit arc actually mechanisms lor all stealing costs and nsk between the firm and outside contractors. They generate a very interesting table which relates some institutional outsourcing alternatives to the four credit I'unctions previously discussed; these relationships arc presented in Table I. Mian and Smith also consider another dunenuon ol'radlit ntnnagentent, who finances the accounts reccivahle nsset. While finanmng consideratioiis are imponant to thc hnrdu firm, wc wish to concentrate solely on the asset manngement rather than linancmg aspects of credit pohcy. and thus exclude such considernuons from our analysis. 35 While these institutional strategies are I'amiliar to most readers, this table is very uscl'ul I'or thinking ah&iut credit manag«ment policy decisions which involve outsourcing;u&d their relationship to thc lirm's crisis and risk. Thc polar opposites are "Crcncral Corporate Crctfii", I'or which nothing is outsourccd (the seller performs all the functions and bears all thc costs and risks) and "Non-Recourse Factoring," where everything is outsourced. Note also that some of these stratcgics are not mutually exclusive, and that the firm can combine them to change the allocation of costs and risk. For example, the linn can use a credit information l&rm tn collect information and a credit insurance linn to bear risk while retaining thc other func&iona. Onc imponani consideration in formulating credit policy regarding thc four credit I'unctions is whether to utilize an outsourcing alternatives or to employ an internal mechanism to manage thc funciion. CREDIT INVESTIGATION AND RISK ASSESSMENT The first ol'hc four functions is credit investigation and risk asscsstnent, which involves the collection and evaluation of information rclcvant to the customer's ability io pay and its policies with respect to making payment. This information is accumulated, then analyzed to provide an assessment of likely payment time and credit risk. ~C'di t st:&».T:.g'''dt lt:., t;hdh':h acumen, payments to thc trade, the linancial health ol'hc business and iLh owners, and so finch are collected. Some informaiitm of this sort will have bccn accumulated as pa&t ul'hc selling prt&cess; contacts bctwecn salespeople and the buyer allow thc seller to acquirc insight into th« buyer's competency. This knnwledge can come from thc seller's intimacy with thc marketing channel in which it operates (Smith «c Schnuckcr, 1994), or because the salesperson visits the account regularly and is able to monitor its credit worthiness on a continuing basis (Mian 8c Smith. 1992). Such knowledge can provide valuable clues regarding credit risk. When the scllcr knows that "They have to pay because their hank won't give them I'inancing without sccing 'paid'nvoices" or that "They have to come hack hccausc wc have the best puces on sheet rock," credit risk is less &lain it woultl be othcrwisc.i However. when thc amount ol'credit to hc granted is large, it is advantageous to accumulate other data on thc buyer, including inl'om&ation on financial health and payments to thc trade. Onc alternative is I'or thc scllcr to make inquiries directly to other suppliers, the buyer's bunk, court records. and other inl'onnation sources. Unlike inl'ormation gleaned as a byproduct of the selling process, such efforts are ct&stly in iimc and money. Large sellers frequently make such direct inquiri«s in the management of their credit risks. Alternatively, ihe scllcr may employ credit inl'onnaiiot& vendors (such as Dun and Brads&rect or TRW) to colic«& all or parts of this inf'ormation. For tl&e small I'irm, this strategy is likely to he less costly than accumulating this inl'ormation in-house (for discussion, sce 'hese and &nher examp&eh uf small husiness credit pmctice used in this paper uere suggested hy an annnynutus I'h'Vlltt'cr. 36 Golob, 1987). There are huge returns to scale tn credit data gathering, making the per-unit costs of data gathering by the small firm considerably higher than for the commercial data vendor or for the large firm with many customers to investigate. However, information collected by credit information vendors is neither as timely nor as need-specific as when the small firm itsell'ollects information at the time the credit decision is being made. Blending specific credit information with that obtained I'rom credit information vendors may be necessary to offset these madequacics. Risk Assessment. This process turns credit information into an assessment of credit nsk. Internally, the owner/manager can perl'orm this task or can hire a credit professional to perl'orm it. Again, returns-to-scale are an important consideration. Prot'cssional credit managers turn credit information into a risk assessmcnt by applying reasonably sophisticated analysis (Christie & Bracutt, 1986). In general, thc owner/manager will not have this expcrtisc, and will make errors in credit decisions that someone with this expcrtisc would not make. These errors are costly in terms ol'ad debt loss and accounts receivable carrying cost, both of which are proportional to the size of the receivables portfolio. The smaller the receivables port('olio, the less likely that expenditure ol'hc lixed cost ol'employing a credit analysis is advantageous. (Il'his is so, smaller firms should recognize the tradeoff and bear greater bad debt costs and carrying costs than larger firms. There is empincal evidence that such costs are. in fact, higher for smaller firms; scc Grabowsky, 1976.) If a credit manager is not hired, the owner/manager or some other internal employee can perl'onn thc risk assessment task. However, there is an outsourcing alternative some connncrcial suppliers of credit inf'onnalion also provide indices of credit nsk which are intended to summarize the information they provide into a smgle risk score. (Good examples ol'his are the Dun and Bradstreet "Paydex" score or Dun and Bradstrcct rating.) By employing these indices as assessments of'redit risk, the small firm avoids the problem of inexpert in-house risk assessment.'owever, there are two dilficulties in basing the lirm's assessment ol'redit risk on these commercial indices. First, these indices are only rough indicators ol'credit risk. En'ors in credit risk assessmcnt (relative to what would be best for the finn if a complete credit analysis were performed), and consequently in credit decision-making, are a likely result. Second, when risk assessment is outsourced. there is no direct way for the owner/manager to incorporate the special knowledge gained during the selling process mto the risk assessment. CREDIT GRANTING DECISIONS Credit grantmg decisions arc based on the tradeoff between the costs and risk of granting credit (credit risk and accounts receivable carrying costs) and the benefits of making the sale. These benefits may include short-term profitability considerations ("They are buying 'ee "The nnpnct of online business mformatton on the commercial user" ( l 987) I'or n case study of a small firm's credit approval system based on such indices Nore that non-recourse factonng also performs the credit mvesttgauon and assessment funcuons, but also requires that the firm give trp other credit funcnons We defer discussion of non-recourse factonng to a specml section later in this paper 37 last year's model and we need thc warehouse space") or longer-tenn benefits ("We haven't sold in that rcginn before, and we can talk about it to other customers"). The firm must decide whether credit is to be granted, how much credit is to be granted (thc "credit linc" or "credit limii"), and thc terms under which credit is to be granted. Who cts credit and how much credit is ranted. During this step ol'he credit evaluation process, thc risk assessment is turned into an assessmcnt of credit-worthiness. Like risk assessment itscl1', the prot'cssional credit manager is likely to make more advantageous decisions than the small firm's owner/tnanager, hut at a substantial fixed cost. However, there arc strategies which allow thc seller to cl'I'ectively outsource the credit-granting decision. Numerous PC-based commercial decisirm support systems arc m&w available to aid decision-makers in making credit-granting and medit-linc decisions.s These systems vary greatly in complexity; some utilize expert systems technology to replicate the judgment ol'n experienced credit manager (for discussion sec Srinivasan dz Kim, 1988) or give resulhs based rm previously-dcvelripcd siatisticul credit-scoring models (such us Altman's Z score; Altmtut, 1968) Some require exlensivc credit investigation, while others employ only a few pieces of credit inl'ormation in their decision methodology. These decision support systems arc not without their drawb;u:ks. The major cost of employing these systems to make credit decisions is not the system's acqui si ti on or application, hul the coal of the inappropriate decisions thai sometimes result Iroin these systems, relative to what a cnmpctcnt credit manager would recommend. A wide variety OI'types of information can be rclcvant to credit-granting decisions, but any credit decision support system must inevitably incorporate assumptions io limit this domain. These tassumptions may or may not bc appropriate for specific decisions, and thcsc systems have no "cr&mmon sense" tri make thc necessary adjustments (Coats, 1988). Credit tet&t&s. While thc small business must generally meet its competition in tcnns of the number ol'days it allows buyers io take before payment, a ma)or question is whether thc sellm should oflcr a "cash" discr&unt for payment made in a shorter lcl1glh of time (I'tn example, a two percent discount I'or payment made in 10 days).'wo differences between small »nd large firms argue that small I'irma should I'ind thc use ol'cash discounts to bc more attractive than lurger Iinns, despite the very high cost of such discounts (the yearly cost ol'hc discouni I'or terms of 2 percent 10 days nct 30 days is over 40 percent). The Iirst dilference has to do with thc small firm's great&r reliance rm internal cash Ilows. Because cxternul Iinancing is very cxpensivc, the small firm needs to recoup cash from 'For rcccnr revi ws of tive such syuernv, sec eCredtt vconng and armlysrs. 1999 sofrwarc reviews," 1999 Meall 1199&) also presents overviews ol several computer-hnsr:il sysrcrns intvrtded to aisisr,mall husrrmsvcv wnti crerlit-grantmg decisinnv nnd other cre&hr I'uncrions * 'Gcttrng customers ro pay on rirnc How ro rricrease your cash tlow and profits," 1990, suggcsrs that offcnng cash discounts is an ailvantagcous straregy for small firms 38 sales as quickly as possible to linance itself. Therefore small firms should be more willing to bear the substantial cost ol'hc cash discount than larger firms Second, when lacking thc expertise of a credit manager. Ihe small linn's assessment of buyers'redit risk is less accurate, and the taking or skipping of thc cash discount provides an important and useful signal concerning thc buyer's true credit nsk (Smith. 1987). COLLECTION DECISIONS In practice. thc collection function is dichotomized into two types of collections: routine collections from ongoing customers and collections from accounts which are no longer purchasing from the scllcr and for whom standard collection efforts (tclcphone calls, letters. etc.) have failed (scc Christie and Bracuti. 19B6, pp. 495-499). Unlike many of the other credit functions. where financial expertise, returns to scale, or cash liow considerations arc imponant, routine collections can usually be economically per- formed hy thc small firm, and only in special cases is it cost effective to outsource this function. Thcrc are a I'cw special collection methods that sometimes produce better results, but most of'hc basic collection techniques are straightf'orward (for dcscnption, sec Christie & Bracuti. 19g6, pp. 479-514). However, once standard collection tcchmques have bccn exhausted, it is advantageous for thc small firm to utilize a collection agency in I'unhcr anempts to collect the debt. When routine collection cl'I'orts I'ail. the next steps generally involve special expcrtisc in collections (visiting thc debtor to prr:ss I'or payment, ctc.) or suing the debtor I'or payment. Most small firms do not have the legal aiul collection expertise necessary to perform these functions in-house, but collection agcncics specialize in such matters. (For more on collection agencies and what they do, scc Christie and Bracuti, 19gfx pp. 497-499 and 513-514.) BEARING CREDIT RISK Ol'all the contrasts bctwcen appropriate credit policies for large and small firms, the greatest difl'ercnce occurs with rcspcct to bearing credit risk. Because their costs of external capital are so much higher than large linns, small linus must rely morc heavily on cash inliows from sales, which come to the linn via the collection of trade receivables. The default of a debtor rcduccs these collections. The small linn should therefore be much more averse to credit risk than thc large lirm Thus. while thc laige finn may choose simply to hear the credit risk. the small firm should be morc inclined to lind a hcdgc against this risk. Both external and internal hedging strategies arc availablc. Externally, thc linn can outsource the bearing of this risk by purchasing credit insurance. Credit insurance is available for thc firm's entire receivables portfolio or I'or specific customers, ihough such insurance is costly (Mian & Smith, 1992). Another alternative is to accept business purchasing credit cards or personal credit cards in payment I'or iradc purchases. Acceptance ol'hese cards is predominant in retailing, where most small I'irms have adopted them in lieu ol'ther credit arrangements. 39 While the credit card issuer bears the credit nsk and pays quickly, thc principal disadvantage of thcsc cards is their cost, which is typically 1.75-2.5 percent ol'ales for business purchasing credit cards (Blcaklcy, 1995) and 3-4 percent of sales I'or personal credit cards (wCredit cards and small business," 1987). Accepting these cards for purchases is equivalent to advance non-recourse factoring, a topic to be discussed in detail later in this paper. There are also internal policy mechanisms that can be used to limit credit risk. The most common is to impose a credit limit on each debtor and enl'orcc this limit by requiring payments il'he debtor's balance excccds the limit.'he cost of this, siratcgy is lost sales. II' debtor places an order which results in its balance exceeding ihs crfxlit limit, cvcn though the debtor's account is not past duc, enforcement of thc credit limit requires that thc debtor make a payment to reduce the balance. From a cash flow standpoint, rather than make the payment the debtor is better off ordering from a competitor, and I'requently docs. When thc amounts ol'hese lost sales arc large (as when the debtor is a major customer but cntails substantial credit risk), the purchase of credit insurance may offer morc advantage than enforcing the credit limit, even allowing I'or the cost of this insurance. When the buyer is incorporated, another mechanism which can he used to limit risk is to obtain a personal guarantee of the debt from the owner. This guaruntce enhances thc likelihood ol'collecting the debt and increases thc recovery if the buyer del'aults. (Sce Scherr, 1989b, I'or analysis of the cfl'ects ol'ersonal guarantees and similar strategies on credit-granting.) ON NON-RECOI)RSyE FACTORING Prior discussion suggcstcd that, while there arc internal strategies which will achieve many ol'he same results, there are advantages to thc small I'inn in outsourcing all credit functions except routine collections. Using non-recourse factonng outsources all of thcsc I'unctions (though routine collections are also passed on to the facior). Yct only a tiny fraction ol'mall non-retailing firms usc I'actoring." Why don't more small lions usc non-recourse factoring'? One possibility is that small firms may Iind advantage in retaining some credit I'unctions but not others. Another explanation is that, because thc factor's margin on the sale is less than the selling I'irm's, the I'actor can bear less credit risk. As a result, factors'redit-granting policies may be too conservative I'or many sellers. 'ee Reranek and Schcrr 11991)for discussmn of the venous types ol credit limits and then use hy large firms nn&l Scherr (1992) for discussinn of credtt tom ts stralcgy and development of a mathernancal model for settmg crcdn ltrntts "The Federal keserve's Annual Statistical Ruttettn estnnates that only 888 billion irt rccetvables, whtch ts a very small fracrton of tourt business rccctvahles, were lactored in 198S; see Mian and Smnh, 199', p. 1911 40 Still another explanation may lie with the reputation of factoring as a high-cost strategy (Farringer, l986). When I'actoring is discussed, the costs typically quoted are for advance non-recourse factoring. In advance I'actoring, in addition to performing credit functions, the factor buys the receivable on a discounted basis and pays immediately, providing financing for the linn. The fees for this financing function, along with I'ees for credit functions, result in fairly large total costs (see Smith & Schnucker, 1994. for discussion of this point). However. the rclcvant cost I'or credit management services only is much lower; Farringer (l986) estimates that the typical factor's I'ee for credit functions is only one percent of thc face value of the receivable. Despite the problems in differing incentives and consequent credit-granting decisions bctwccn thc finn and the factor. this is a reasonably auractive level of cost for many stnall firms in return for performing credit investigation and risk assessment, making credit granting decisions, performing collections, and bearing credit risk. IMPLICATIONS FOR PRACTICE Several factors make thc small firms'hoice ol'redit stratcgics quite different from that of larger linns. Small firms have limited cxpertisc in financial analysis, face returns-to-scale disadvantages in managing credit, and have morc difficulty in raising funds externally than do large firms. Thc challcngc to thc small fimi's owner/manager is to formulate an effective credit strategy that reflects these factors. This strategy can utilize mechanisms internal to the firm or can cotnbinc thcsc with outsourcing alternatives. This article generates policy recommendations for small firms based on the trade credit literature. The resulting recommendations, minus their rationales (which are given in the body ol'he paper), are presented in Table 2. This table assumes that the seller does not employ a professional credit manager and that the seller chooses not to accept corporate credit cards or utilize non-recourse factoring, each of which extcrnalizes all credit functions. 'In any case, the small firm needs to consider carel'ully the benefits and costs of alternative credit management policies in developing its credit strategy. 41 Tahle I Inrlinnirma! Oulsaarcing A!ternati l es fnr Credit Managelnenr Credit Managcmcnt Who Docs Who Makes Who Docs Who Bears Strategy Credit Credit Collections? Credit Investigation Granting Risk' and Risk Decisions? Assessment'! General Corporate Firm Firm I' l'nl I irm Crctlit Usc ol'a Credit Credit Firm I'I l'nl Ftfn1 Inlol'nnnlon Irllln Inlollrnnton I irm Use of a Collection Firm Fl I'Irl Collection Firm Agency Agency Usc ol' Credit Fi I'nl Finn Inl I'nl Credit InsolllnCC Conlptnly hlsalanlCC Conlpany RccoUI'sc I'aclol'Ing Firm Fiml Factor F1 sin Non-RccoUfsc I'actol Factor Factor I actor FUCIOI1flg Scarce: Adapted I'rom Mian and Smith (l992k 42 Table 2 Trade Credit Policy Recomntendationsfor Smrtll Firnis Policy Reconnncndation 1. Credit Investigation and Risk Assessment A. Investigation Purchase credit inf'onnation from commercial credit inf'ormation vendors whmtcver possible. B. Risk Assessment Usc a commercial index (fMB rating, Paydex. etc.) to summarixc many aspects of credit risk. 2. Credit Granting A. Who Gets Credit Usc commercial decision softw«re to make credit-gr«nting decisions and to assign credit limits. but bcwarc of thc limited dmnain of these systems. B. Credit Terms Usc cash discounts, even if larger coinpctitors do not, to spccd collections and provide inl'ormation on the credii worthiness of'uyers. 3. Collections A. Routine Collections Perl'orm thcsc in-house. B. Collections from Outsource these to collection «gcncics. Defaulted Buyers 4. Bearing Credit Risk I:mploy crctlit limits to limit losses in dcl'suit. Howcvclx wlit'll clilof'ci fig ii credit limit icsults in lost sales I'rom a major customer, use credit insurance instead. Consider requiring incorporated buyers to provide personal guarantees. 43 RFFERENCES Altman, E.I,, (1968). Financial ratios, discriminant analysis and th«prcdiction ol corporate bankruptcy. Journal of Finance, September, 589-609. Ang, J.S. (1991/1992). On a theory of finance for privately held lirms. Journal of Small 13usincss Finance, l(3), 185-203. Atkinson, J.A. (1992). Giving credit where it's due. Small Business~Re orts, Junc. 15-19. Beranck, W.B., 41'c I .C. Schcrr (1991). On the signilicance of'rade crctlit limits. Financial Practice and Etlucation, Fall/Winter, 39-44. Blcaklcy. F.R. (1995, Junc 14). When corporate purchasing goes plastic. Wall Sticct Journal, B-l, B-9 Christie, C).N., 8t A.E. Brucuti (1986). Credit Executives Handbook. Columbia, Mdz Credit Research Foundation. Coats, P.K. (1988). Why expert systems fail. Financiul Mana ycmcnt, Autumn, 77-86. C d -. dx I: Il6 xl .;. j)947).C~NMzaa, Iyh;My. J3). Credit scoring and analysis: I c/95 software reviews (1995). Businchs Crctlit. May. 20-23. Ef'fcctivc credit policics: Maximize sales and minimize had tlchts (1987). Small Business ~Rc orts. July, 50-53. Faria, A.J. (1976). Reducing bad-check losses: Some practical guitlclincs. Journal ol'Small 13usincss Mana emcnt, January, 7-11. Farringcr, E. (1986). Factoring accounts rcceivahlc. Journal of Cahh Mana einent, March/April, 38-42. Geuing cusiomers to pay on tiinc: How to increase your cash I'low and prolith (1990). Prof'it-Buildin Strate ics for Small Business. July, 5-7. 9 I h. A. )I9N7). Th dl d I . ~Cdi M 6 "«, )7 6: 9-3f). Grahowsky, 13.J.(1976). Mismanagcmcnt of accounts rcccivable hy sinall business. Journal ol'Small Business Mana cment, October, 23-28. 6 I:,l)W t)9N9) C II » 9 Nt . I I ".htl . Mua)I~N. ':ll »:,J ly. 45-47. Mcall, I . (1993).Taking the pain out of debt colleciing. Accountan)~, Scptcmhcr, 59-(i2. Mian, S.l., /k C.W. Smith Jr. (1992). Accounts rcccivahlc managcmciit: Theory anil evidence. Journal ol'inance, March, 169-200. Myers, S. (1984). Thc capital structure puzzle. Journal of Finance, .Iuly, 575-592. Pcttit, R.RM ctk R.F. Singer (1985). Small business finance: A rcscarch agenda, I.inancial ~M:: «,A « .47-6tl. Schen, I .C. (1989a). Modern Workin Ca ital Mana ement Text and Cnscs. Englewood Cliffs, N,Jz Prentice-Hall. Schcrr, I .C. (1989b). Bargaining in trade credit granting: A preliminary analysis. Journal ol'he Midwest Finance Association, Volutnc 18. 29-36. Schcrr, FC. (1992). Credit-granting decisions under risk. En inccrin ~ Economist, Spring, 245-262. Smith, J.K. (1987). Trade credit and inl'or)national asymmetry. Journal of Finance, September, 863-872. 44 Smith, J.K., & C. Schnucker (1994). An empirical exammation ol organizational structure: The economics of the factoring decisions. Journal ol'Co orate Finance, March. 119-138. Srinivasan, V., & Y.H. Kim (1988). Desigmng expert financial systems: A case study in credit management. Financial Mana ement, Autumn. 32-44 The impact ol'nline business inl'oonation on the comincrcial user (1987). CreditM~,rb y,18- tl. Walker, E.W., & J.W. Petty ll (1986). Financial Mana ement of thc Small Firm. Englewood Cliffs. N.Jz Prentice-Hall. 45