SITUATION

Steve Jones is the 35-year-old owner of a highly competitive small business, which supplies temporary office help. Like most buslnesspeople, he Is always looking for ways to Increase profit.

However, the na-ture of his competition makes it very difficult to raise prices for the temps services, while reducing their wages makes recruiting difficult. Jones has, nevertheless, found an area-bad debts-in which improve-ment should increase profits.

A friend and business consultant met with Jones to advise him on credit management policies. Jones was pleased to get this friend's advice, as bad debts were costing him about 2 percent of sales. Currently, Jones has no system for managing credit.

1. What advice would you give Jones regard-ing the screening of new credit customers?

2. What action should Jones take to encour-age current credit customers to pay their debts? Be specific.

3. Jones has considered eliminating credit sales. What are the possible consequences of this decision?