Does your business have a credit policy?

Most businesses know the importance of a business plan to get your business off the ground. And marketing and sales plan to grow your business. But what about the next stage….collecting cash. This is THE most important stage if you want to stay in business.

A credit policy can set out clear objectives and guidelines to your staff.

Here are 3 things you should include in a credit policy when considering doing business with new customers:

• Credit checking – every customer must be fully credit checked and tested prior to offering credit. There are plenty of online systems to check a businesses credit history.  Remember credit is a privilege, not a right.  Also, why not phone your potential new customer’s previous customers and ask if they paid on time, as support to your credit check.

• Credit limits – how much credit do you want to extend to your new customer. Start off low and then build up once you know they can pay on time, you need to build trust and this is when you can extend credit. Any earlier and you are placing your company at unnecessary risk.

• Contact forms – each new customer must complete a saved template contact form, signed by their MD. This information should contain details such as: Accounts Payable contact, all email addresses, telephone numbers, fax, alternate trading addresses, mobile numbers – this detail will be invaluable if your customer ever defaults on a payment, as fast contact is critical to resolving any queries and ensuring timely payments.

This list is not exhaustive when it comes to a credit policy, but these are important considerations your Credit Department or you as a business owner should be thinking about when you do business with a new company.

Are credit management techniques used in your business? Do you set credit limits? How strict are you with your customers if they fail to pay on time?