So – you got stung with several bad payers. How do we learn from this situation?
Hopefully in the first instance you will review your policies and procedures. Assuming you have them of course. If not – your first learning experience is that you will be needing these for the future.
Not only that – you need the buy-in from all departments to ensure they follow the rules, both internally and externally.
From a financial perspective, it will set a ta...
Most larger organisations understand that businesses will almost certainly at some time, not be able to collect all outstanding accounts. Companies can be placed into Receivership or Liquidation and individuals can declare bankruptcy. Others can simply refuse to pay.
For this reason, it makes sense to have a contingency for any doubtful debts on your monthly ledger. It doesn’t matter what the reason may be for non-payment, but it’s a good method of acco...
What type of organisation are you?
Are you the company who makes a major difference in the collection of your debts each month, with effective policies and procedures, well-trained staff and clearly defined expectations?
Or, are you the company who makes minor improvements each month spending more time trying to sort queries that could have been avoided due to lack of effective policies and procedures, and staff who have no clear expectations?
If ...
If you continue to do the same thing, you will continue to get the same result. If that result is not economical or financially viable you need to change what you do.
A sale is not a sale until it is paid for. We have all heard this before but we still extend credit thinking that we need to ‘keep the business’.
Follow up with your Customers is paramount to the success of your business. A good relationship with your Customers doesn’t have to be with o...
If someone changes their payment pattern, or even their ordering pattern suddenly, they may be a financial risk.
Whilst you can avoid all risk, follow up and regular credit checking are the two most effective methods to reduce your risk of delinquent payers.
Look for the signs and this may help you identify potential risks:
Managerial changes within an organisation.
If a company is experiencing difficulties sometimes senior management will chan...
1) No clear records or contact details
Get as much information as possible up front, on your Credit Application
Get to know your Customer.
2) No clear process on expectations for payment by your Customer
Make sure Terms and Conditions are agreed/signed before any work is carried out.
3) No policy or procedure on internal processes for payments by your Customer.
Make sure you have a Credit Policy that all parties are aware of so th...
How many of you aren’t getting paid on time and the cost of collection is eating into your profits?
Consider this:
Does your Credit Policy and/or billing structure allow you to charge late payment penalties?
Are you worried that you will lose a Customer if you charge a penalty?
Can you afford to continually allow late payment, or worse no payment at all?
What is the cost to your business of not being paid on time
Now consider this:
...
Most of us have heard all the excuses as to why an account hasn’t been paid or why it can’t be paid. For effective credit management, we need to prevent the excuse to delay payment.
Here are a few that you can quash very quickly as a reason for not being able to pay:
1) I haven’t received the invoice.
Make sure your database can log the date you have sent your invoice – either by email or by post. Failing that – email a copy immediately you are ...
Know your Customer
Undertake some homework on your prospective Customer to help determine your future business decision-making.
Ensure you have their correct legal entity name if they are a registered company.
Ascertain who all other possible Directors are. Make sure they haven’t been involved in now defunct companies. If they have – this may affect your decision to extend credit terms or how you transact business at all.
Obtain a Com...
If you haven’t dealt with a Customer for over 12 months, do you rely on your previous credit application information and credit check data to resurrect the account?
If you answered yes, then you could be gearing up for big credit risk.
Don’t assume that all the details you have in your system are current. Make the call! Contact your Customer and have that conversation about their current credit status. Or take the time to obtain updated credit data f...
