Credit is an essential element in modern businesses. In general, a credit plan in your company will raise the revenue because it encourages increased purchases. This trend can be attributed to the separation of the pleasure of buying from the pain of payment. On the other hand, irresponsible credit and collections can cause significant problems for your commercial operation. In simple terms, if you do not control the risks of lending and ensure that payments are collected on a timely basis, you could end up with cash flow problems. Therefore, consider these simple guidelines to help you streamline your credit and collections practices.
Eliminate Payment Barriers
One of the common challenges that interfere with credit and collection is the presence of payment barriers. In simple terms, if your customers feel that it is inconvenient to deal with your payment procedures, they will be less likely to pay on time or even purchase from your company. Therefore, you should invest in practices which make it easy for customers to do business with you. Your business should have multiple payment methods to meet the needs of diverse clients. Also, consider establishing flexible billing cycles and designing special incentives to encourage buyers to pay early.
Perform Efficient Risk Assessment
You should perform a risk analysis before offering credit to your customers. Understanding the risks presented by each company when providing goods can help you avoid bad debts and general financial problems. Typically, manual calculation of data can be difficult to handle with efficiency. Therefore, you should think about investing in an automated credit scoring program. The software will provide valuable insight on the customer's creditworthiness and help in establishing the credit limit. When performing risk assessment, you should collect as much information as possible for an accurate verdict. However, you should minimise capture of data which is not directly relevant to the crediting process because it will make precise analyses difficult.
Establish Systematic Collection Processes
Systematic collection procedures are critical to the success of crediting structures. In general, an effective collection strategy should consist of early and frequent contact. When you reach your client early, you will ensure that your receivables do not lose their value to your company. Calling often is critical in promoting the speedy collection of delinquent debts. If possible, you should have an employee dedicated to this task.
Finally, you should ensure that your credit and collection procedures are well-integrated with your accounting functions. If you are experiencing trouble streamlining these elements, consider consulting a commercial accounting firm.