Why you need a credit policy
Clearly outlined credit procedures will protect your
business when customers don't pay:
Michelle DUNN
In this tough economy, many business owners are finding that
customers who have always paid on time are struggling to stay current.
Other customers who were already slow payers are falling farther behind
or are unable to pay at all.
Now is the time to create a credit policy to keep your existing
customers, get paid and stay in business. This policy should include
clearly outlined procedures and actions for when someone can't pay so
you can immediately take steps to help your customer and protect your
business.
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The first step is to look at your
accounts receivable report and ask yourself who owes you
money |
The first step is to look at your accounts receivable report and ask
yourself who owes you money, how much they owe and how past due is the
account.
Those delinquent accounts should take precedence; work on making
calls to get them paid. Do not let any other customers charge anything
until you check their credit; doing this will help you minimize your
risk and go a long way toward presenting your company as being serious
about your business.
Becoming the squeaky wheel serves two purposes: It lets your
customers know from the get-go that you are serious and will not let
anything slide.
It also gets older, past-due balances paid off, because squeaky is
annoying, and the only way to make it go away is to pay the bill.
What do you do now when a customer becomes past due? Are you running
into problems when you contact your past-due customers? What have you
tried to do to get paid or to get control of your accounts receivable?
Immediately make a list of things you want to happen when a customer
becomes past due. You may want to make a personal visit, send a friendly
reminder or make a phone call. Decide what will work best for you and
what you have the time to execute. Write down three steps you can take
when an account gets past due, post it by your computer and start doing
those things each time someone goes beyond the terms agreed on.
Next, make a list of things to do when customers give you some common
excuses.
That way you aren't thrown off guard when it happens; you'll have an
answer ready and an action plan. For example, when a customer tells you
the cheque is in the mail, don't just say "OK" and hang up. Step one
might be to ask for the cheque number, then ask for the cheque amount. I
have been doing collections for a long time; many times debtors will
tell you the cheque is in the mail and when it arrives, it is for an
amount less than they owe. Verify the dollar amount. If they tell you a
lesser dollar amount than you are looking for, ask them why it is less
and set up a payment time for the balance.
You can also ask when and where it was mailed. Post these questions
next to your computer so that when someone gives you this excuse, you
are ready and can take the next step immediately.
Something to think about: 50 percent of a credit manager's time is
spent resolving people problems related to poor communications and
follow-up.
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