Top Tips On Credit Management
Along with a healthy cash flow, good credit management is essential to any business and no company can afford to not take it seriously, especially when the availability of credit is tight. Recession or no recession, any business can compete and even grow just by adhering to a few basic principles of credit management outlined below.
Get to know your customer
Knowing your customer is critical when it comes to credit management.
Check the exact name and legal status of each of your customers and credit check new customers where you can. Do not simply rely on credit ratings, ask for references from other suppliers and make your own assessments on the customer's propensity to pay.
Knowing your customer is critical when it comes to credit management.
Check the exact name and legal status of each of your customers and credit check new customers where you can. Do not simply rely on credit ratings, ask for references from other suppliers and make your own assessments on the customer's propensity to pay.
Set out payment terms
Once you decide to take on a new customer, define your credit policy. Agree payment terms at the order stage and make them very clear. Do not assume that you will be paid on 30 days or end of month following, so set out payment terms in writing and try to obtain written acceptance, ensuring your customer's order does not suggest different payment terms.
Once you decide to take on a new customer, define your credit policy. Agree payment terms at the order stage and make them very clear. Do not assume that you will be paid on 30 days or end of month following, so set out payment terms in writing and try to obtain written acceptance, ensuring your customer's order does not suggest different payment terms.
Encourage timely payment
Printing the payment terms on easy-to-understand invoices that go out on time can also help prompt debtors to pay as will the clear setting out of penalties if a payment is late. Another way of encouraging your customers to pay quickly and on time is by offering discounts for prompt payment.
Printing the payment terms on easy-to-understand invoices that go out on time can also help prompt debtors to pay as will the clear setting out of penalties if a payment is late. Another way of encouraging your customers to pay quickly and on time is by offering discounts for prompt payment.
Get your invoices right
A disputed invoice will not be paid so do not give the customer any excuse to contest the invoice. This requires being on the ball in terms of accuracy such as clearly specifying the goods or services being paid for and being sure to quote the customer order number.
A disputed invoice will not be paid so do not give the customer any excuse to contest the invoice. This requires being on the ball in terms of accuracy such as clearly specifying the goods or services being paid for and being sure to quote the customer order number.
Manage your debtors
Once an invoice has been issued, make sure to keep an eye on your debtors.
For large or important amounts, telephone before the due date to make sure the payment is still on track. If a payment hasn't arrived, don't be afraid to ask for it. In fact, make immediate contact with the customer and be assertive about when you expect the payment, ensuring they fully understand the consequences of non-payment.
An accounting package can go a long way to help you manage your debtors as you can list and track the invoices that are overdue and monitor your performance in getting paid.
Once an invoice has been issued, make sure to keep an eye on your debtors.
For large or important amounts, telephone before the due date to make sure the payment is still on track. If a payment hasn't arrived, don't be afraid to ask for it. In fact, make immediate contact with the customer and be assertive about when you expect the payment, ensuring they fully understand the consequences of non-payment.
An accounting package can go a long way to help you manage your debtors as you can list and track the invoices that are overdue and monitor your performance in getting paid.
Chasing payment
If contacting the debtor to try and resolve the issue has not been fruitful then there are various ways you can retrieve payment.
Firstly, consider exercising your legal rights under late payment legislation to charge penalty interest or add debt recovery costs.
If that doesn't prompt the debtor to pay, then you can hire a specialist debt collector to help you. They have the expertise and time to focus on retrieving the debt.
If all else fails, then you can always consider taking court action but this should be seen as the last resort as it can cost you time and money.
If contacting the debtor to try and resolve the issue has not been fruitful then there are various ways you can retrieve payment.
Firstly, consider exercising your legal rights under late payment legislation to charge penalty interest or add debt recovery costs.
If that doesn't prompt the debtor to pay, then you can hire a specialist debt collector to help you. They have the expertise and time to focus on retrieving the debt.
If all else fails, then you can always consider taking court action but this should be seen as the last resort as it can cost you time and money.
Effective credit management need not require the in-depth knowledge and skills of a trained accountant. With a few best practice methods in place, you can confidently avoid many of the pitfalls often encountered during a downturn. If it is managed correctly, you will be in a stronger position to enjoy fruitful relationships with customers and ensure your business continues to flourish.
Thanks for sharing this very thoughtful feed regarding Credit Management. You're tips were pretty useful. I just have to agree with you, credit management is a serious system that business should not take for granted and sent to risk. It's as important as making sure that your business is keeping on the right track.
ReplyDelete