Question

FOMs often serve as the hotels credit manager thereby identifying and enforcing credit limit for guests staying on the property. assume you are the GM at an expensive resort property. what criteria would you want your FOM to use to establish credit limits for your various guests? what communication would you want the front office to initiate with the guest who was close to exceeding or has exceeded his or her credit limits?

Answer 1

Criteria to establish Credit Limits for your Various Guuests are as follows:-

First step is to collect information about your customer:

• Business expected:
  • Amount of sales expected with the client,
  • Period (in months),
  • Payment term considered,
• Sales Manager feedback:
  • Key customer or not?
  • Position on the market, growing business?
  • Reliable or not?
• Legal and financial information about the customer:
  • Last profit and loss accounts and balance sheet,
  • Company legal form,
  • Date of creation,
  • References from other suppliers,
  • Payment behaviour.
• Customer visit: When the business or the credit risk stakes are high, it is needed to visit the customer to:
  • Get fresh information about customer’s financial situation,
  • Create a personalized contact with the customer,
  • Negotiate financial conditions of the business (payment terms, payment guarantees, schedule of payment...etc.)

Second step is to calculate the required credit limit:

The required credit limit is the business need of credit limit. It is the product of the estimated sales to come, the schedule of invoicing and the payment term granted to the customer.

Required credit limit can be challenged by negotiation with the customer

Third step is to set up the Credit Limit:

Once required credit limit is calculated, it must be compared to the information collected about legal & financial situation of the buyer, and its payment behaviour.

The Credit Limit has to be consistent with financial capacities of the customer and its payment behaviour.