NZQA registered unit standard
Title
Evaluate credit worthiness
Level
4
16958 version 6
Page 1 of 4
Credits
10
Purpose
This unit standard is for people involved or intending to be
involved in the management of business credit. People
credited with this unit standard are able to: obtain trade credit
information; analyse financial information; manage risk of
credit; and process credit decisions.
Classification
Financial Management > Credit Management
Available grade
Achieved
Explanatory notes
1
This unit standard is intended for trade credit applications where the nature of the
application and element of risk warrants higher standards of evaluation. For people
who require outcomes relating to consumer credit, friendly societies, and small
business transactions Unit 16757, Determine applicant’s suitability for credit is
recommended.
2
Legislation applicable to this unit standard includes the Personal Properties Security
Act 1999, Credit Contracts and Consumer Finance Act 2003, Credit (Repossessions)
Act 1997, Privacy Act 1993, and their subsequent amendments.
3
Definitions
Applicant indicates commercial entities.
Organisational practice includes documented policies, procedures, and practices,
and policy and procedure manuals pertaining to credit.
Terms of trade include any conditions of purchase, credit limit billing cycles, payment
due dates, discounts for prompt payment, repossession under the Romalpa clause,
and any trade card conditions.
Romalpa clause includes any terms of trade statement that refers to retention of title
made and agreed to by both parties before delivery of goods.
Credit facility is the amount and type of credit that is being applied for and includes
set and/or flexible credit limits.
Credit approval authority is the authority to approve credit to a specific financial limit.
Several credit approval authorities may be in place within an organisation.
Dun and Bradstreet Report is a generic business information report produced by Dun
and Bradstreet on request to give information pertaining to a company’s operations,
profitability and stability. It is used to evaluate the experience of the business and
the business background of its principles.
Industry practice includes policies, procedures and standards that competent
practitioners in the industry recognise as current industry best practice.
The Skills Organisation
SSB Code 100401
 New Zealand Qualifications Authority 2016
NZQA registered unit standard
16958 version 6
Page 2 of 4
4
This unit standard may be assessed on-job in the workplace using naturally occurring
evidence or in off-job simulated work situations designed to draw upon similar
performance to that required in work in a credit administration and/or credit
management context.
5
All evidence is in accordance with organisational practice where possible, otherwise
evidence may be based on industry practice.
Outcomes and evidence requirements
Outcome 1
Obtain trade credit information.
Evidence requirements
1.1
Obtain legal identification and contact details of the applicant.
Range
1.2
Obtain financial data of the applicant.
Range
1.3
legal name, company number, registered office, billing address,
fax and telephone numbers.
income and expenditure account, balance sheet, cash flow
statement.
Obtain business information about the applicant.
Range
may include but is not limited to – business plan, trade references,
shareholding.
1.4
Explain conditions of purchase and terms of trade to applicant for acceptance.
1.5
Obtain credit checks and reports on the applicant in accordance with legislative
requirements and organisational practice.
Range
may include but is not limited to – Dun and Bradstreet Report,
credit bureau rating.
Outcome 2
Analyse financial information.
Evidence requirements
2.1
Establish trends in owners’ equity
Range
net worth, growth of net worth, net profit growth.
2.2
Calculate the debt to equity ratio.
2.3
Establish cash flow of the business.
The Skills Organisation
SSB Code 100401
 New Zealand Qualifications Authority 2016
NZQA registered unit standard
Range
2.4
16958 version 6
Page 3 of 4
current ratio, quick ratio.
Evaluate risk of business failure.
Range
may include but is not limited to – business plan, z-score, gearing,
Dun and Bradstreet Report, credit rating.
Outcome 3
Manage risk of credit.
Evidence requirements
3.1
Describe elements of risks.
Range
3.2
Evaluate methods of reducing risk.
Range
3.3
success probability, potential losses, potential sales turnover.
progressive billing, personal guarantees, security, liens, factoring,
credit insurance.
Assess inducements to pay on time.
Range
penalty clauses, penalty interest, cash discounts.
3.4
Appraise rights to repossess goods in accordance with legislative requirements.
3.5
Set credit and transaction limits appropriate to the risks involved.
Range
cash only customer, billing cycle, payment due date, terms of
trade, conditions of purchase.
Outcome 4
Process credit decisions.
Evidence requirements
4.1
Determine credit classification.
4.2
Assess the credit facility applied for as to which credit approval authority is
applicable.
4.3
Communicate the outcome of credit application to the applicant.
Range
4.4
payment terms, terms of trade, conditions of purchase, Romalpa
clause, Security Interest registration.
Process and record credit details in accordance with legislative requirements
and organisational practice.
The Skills Organisation
SSB Code 100401
 New Zealand Qualifications Authority 2016
NZQA registered unit standard
Planned review date
16958 version 6
Page 4 of 4
31 December 2020
Status information and last date for assessment for superseded versions
Process
Version Date
Last Date for Assessment
Registration
1
30 August 1999
31 December 2013
Revision
2
22 October 2002
31 December 2013
Review
3
28 June 2005
N/A
Rollover and
Revision
4
15 November 2012
N/A
Rollover and
Revision
5
22 May 2014
N/A
Review
6
18 June 2015
N/A
Consent and Moderation Requirements (CMR) reference
0121
This CMR can be accessed at http://www.nzqa.govt.nz/framework/search/index.do.
Please note
Providers must be granted consent to assess against standards (accredited) by NZQA,
before they can report credits from assessment against unit standards, or deliver courses
of study leading to that assessment.
Industry Training Organisations must be granted consent to assess against standards by
NZQA before they can register credits from assessment against unit standards.
Providers and Industry Training Organisations, which have been granted consent and
which are assessing against unit standards must engage with the moderation system that
applies to those standards.
Requirements for consent to assess and an outline of the moderation system that applies
to this standard are outlined in the (CMR). The CMR also includes useful information
about special requirements for organisations wishing to develop education and training
programmes, such as minimum qualifications for tutors and assessors, and special
resource requirements.
Comments on this unit standard
Please contact The Skills Organisation reviewcomments@skills.org.nz if you wish to
suggest changes to the content of this unit standard.
The Skills Organisation
SSB Code 100401
 New Zealand Qualifications Authority 2016