Credit Control Tips & Importance of Credit Management
The lifeline of each business is a steady cash flow. Pursuing this objective, businesses need to ensure their customers are paying on time, as bad debt is a risky endeavour. Putting an effective and practical credit management strategy is highly important for such scenarios, as while it is challenging, the success of this strategy and function is imperative.
Operating on any of the extremes can lead a business to failure, as being overly cautious, can lead you to lose out on lucrative sales opportunities, leading your business to not progress. While, on the other hand, being lax or rather adopting a laissez faire approach, can lead you to not identify warning signs of a customer being in trouble and there potential insolvency.
Within the entrepreneurial landscape, it is highly important to carry out the function of credit control in an optimal manner, as otherwise, the business runs the risk of becoming stagnant or either failing. Due to credit sales being a common practice within the business world, owing to it possessing the power of nurturing business dynamics and developing new ones, striking a balance is essential. Anything otherwise, however, can lead a business into serious jeopardy.
The Implementation of Proper Credit Management
Perfecting the process is essential for empowering a business to rise through the ranks and gain a competitive advantage.
· Acquire The Help Of An Independent Credit Insurance Broker
Having a proper credit control system in place is highly necessary, as this helps you gauge who to give credit to. However, to protect yourself, acquiring credit insurance is a beneficial route to take, as in the event of customer insolvency, the risk is transferred from your shoulders to the shoulder of the insurer. Not just this, having credit insurance also aids to reduce the risk of financial loss, through the provision of credit management support.
· Start By Setting A Day-To-Day Strategy
It is highly necessary to have a day-to-day plan in place, as otherwise, things can fall apart. From the minute the order is placed to the minute the invoice is paid, you and your team need to employ the use of a coordinated credit control procedure, not to allow the credit period to extend beyond a certain limit.
· Have A Plan In Place For Late Payments
Late payments are inevitable when using a credit sales approach. Nevertheless, to limit this behaviour, it is required to step certain policies in place. These policies and procedures can be a late payment fee or interest, pausing services, calls and letters, to inform the client of their responsibility.
· Train Employees
At the very epicentre of following through with policies is the need to ensure your employees strictly impose these procedures. By providing them with effective training, it is your job to ensure your employees recover the amount, within the due time.
· Document It In Your Terms & Conditions
Communication is of paramount importance. Informing your customers of when they’re required to pay is essential for avoiding any form of commitment issues. By keeping them informed, you can impose any given fee upon them, in case they violate the conditions.