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Credit Management

Credit Management is part of every day life, and Good Credit management should not be treated as a set and forget scenario. Good credit management is an attribute of a well organised person, it involves adequate research before providing credit, it requires a understanding of the laws governing the collection process, and all credit providers should make it a habit to review all their debtor client's, quarterly and annually. In addition to this, good Credit Management begins with an effective credit control policy. 

An Effective Credit Control Policy

Developing an effective credit control policy and proper management of your receivables maximises the cash flow of your business. It’s important to get the sale, but if clients can’t or won’t pay, there’s no point in getting the sale in the first place.

Listed below are steps designed to assist and improve your existing credit policy:

  • Before providing credit to a new client, consider sourcing credit reports or checks to investigate their credit rating. This is essential if they are applying for a large amount of credit.
  • Your credit application document should include a request for information such as middle name, date of birth, home address, telephone and mobile telephone, 3 x trade references and also a secondary contact with their telephone and address.
  • Consider implementing a directors or personal guarantee document for the client to sign. This can act as a filter to deter bad payers and can greatly improve your chances of recovering the debt if further action is necessary.
  • Clearly explain your terms of trade at the start of the relationship. Display it on all invoices and avoid changing the rules - never give debtors an excuse not to pay.
  • Change your monthly debtors statements to show: Current, Overdue, Pay Now . If you offer the traditional: Current, 30 days, 60 days, 90 days then this system tells clients that payment in three months time is acceptable.
  • Monitor your receivables on a regular basis. Rank debtors according to value and risk. Carefully review any reports that indicate a change in buying habits or client spending.
  • Keep your finger on the pulse. Ask your sales team to report directly on any information they may pick up in the field about a client.
  • Structure your policy so you do not have to pay commission or bonuses when the client doesn’t pay you. This will improve the quality of new clients and your bottom line.
  • Be sure to keep your paperwork in order. Retain signed delivery dockets to avoid potential misunderstandings or disputes.
  • If an account goes beyond your trade terms, telephone the client and ask for payment. At this stage your reminder should be polite and not offensive.
  • If a client requests extended credit this should be interpreted as a red flag. Probe thoroughly and make a decision based on their particular situation and your cash flow requirements.
  • If the account remains unpaid, stop supply to this client immediately. Advise the client of your decision in writing or by telephone. Try to uncover the nature of the problem or dispute and work towards an arrangement that suits both parties.

Express Collections

We have taken the opportunity to develop a credit management system as an addition to our collection system, it is designed to assist you in making the right decision, and to avoid bad debtors in the first place. Credit Management is an integral part of our software, giving you the tools to

  • Process letters to clients,
  • follow-up letters to maintain good customer liason,
  • Process agreements between you and the client,
  • Record status log, which keeps you up-to-date with your client even if you are not at the office. 
 

CONCLUSION

Never allow any client to owe you an amount of money so large that if they don’t pay, your business will suffer or even collapse. By incorporating these simple rules and tailoring them to suit your particular business; you can help prevent costly problems with delinquent debtors and bad debts down the track.


Download a sample credit account application, ( print the first page on your letterhead )

Sample Credit Account Application

 

For our members requiring a credit account, ( complete the form below and return to us )

Member Credit Account Application