To develop a complete and effective credit policy that minimizes your company’s bad debt write off is essential for reducing cost and improving bottom line profit. An effective credit policy helps cultivate the necessary cash flow to maintain current business resources and grow to desired levels. Inefficient or poorly enforced credit policies force decision makers to cut expenses. Moreover, decision makers are constantly looking for areas within the business model to cut liabilities without compromising impact to their core operation. Remember: A penny saved is a penny earned. Here are nine solid tips that will dramatically improve your credit policy.
- Obtain complete contact information at the time of sale or service
- Get customers to sign a credit application/contract at time of sale or service
- Check credit references before providing products or service
- Create a recovery plan that outlines what steps should be taken in the event of delinquency or an NSF check
- Focus attention on accounts that start to become delinquent
- Refuse more product or service to delinquent customers
- Have validation of the debt ready to provide in a timely manner
- Maintain consistent credit approval and terms with customers regardless of relationship with them
- Utilize a professional collection agency early in the delinquency
Implementing these tips will improve in-house time management and increase revenue. Keep in mind: The “collectability” of any account starts the day you extend credit and is parallel to the quality of your service or product, and parallel to the terms of your credit policy.