Week 7 - Credit Terms Discussion Board

You were just hired as the assistant to the Chief Financial Officer (CFO) of Saddleback Specialty Shops, an exclusive specialty chain store company that has thirty retail stores concentrated in Southern California. Among other things, the payment of all invoices is centralized in one department that you will be managing. Your primary responsibility is to maintain the company's high credit rating by paying all bills when they are due and taking advantage of all cash discounts. Janie Saddleback, the former assistant to the CFO, who has been promoted to CFO, is training you in your new duties. She instructs you that you are to continue the practice of preparing all checks "net of discount and date them the last day of the discount period." "BUT" Janie continues, "we always hold the checks at least four days beyond the discount period before mailing them. That way we get another four days of interest on our money. Most of our creditors need our business and don't complain. And if they scream about our missing the discount period, we blame it on the mailroom or the post office. We have only lost one discount out of every hundred we have taken using this strategy. I think everybody does it. By the way, welcome to our team!"

Share with your classmates answers to the following questions:

1. What ethical considerations exist in this scenario?

2. What stakeholders are harmed or benefited?

3. Should you continue the practice started by Janie Saddleback? Do you have any choice?