Debtors - The Simple Rules
With interest rates on the rise again, it's even more important that businesses not lose money with debtors who do not or cannot fulfil their obligations.
To this end, we have devised some steps to help out the credit policies for your business. Keep them in mind as if your debtors are not carefully monitored, your business could run into costly problems later on.
- Don't ever be afraid to ask customers for payment. As long as your follow-ups are polite and inoffensive, you shouldn't have any problems.
- When you get new customers, you can use references and reports to investigate their credit rating. This should work to prevent any large problems later on.
- Clearly explain your terms from the outset and stick to them. This will make collecting on slow payers much easier.
- Review any available reports regularly to observe any changes in your clients? buying habits or debt. Customers you have been dealing with for years are often the greatest risk, because they aren't checked on frequently.
- Rank debtors according to value and risk. Monitor their accounts accordingly.
- Be on the lookout for warning signs that your customer might be experiencing difficulty. For instance, an increase in a customer's orders for your company might be an indication that other suppliers are removing their credit facilities.
- Make sure to keep your own services orderly and systematic. Keeping signed delivery dockets means you can prove prompt delivery and avoid problems later. If you don't send invoices out promptly, why should your customer feel motivated to pay on time?
- If accounts are remaining unpaid, stop supply to this customer immediately as a standard aspect of your credit system. You can then discuss the situation with your customer and reach an agreement that suits your needs as well as theirs.
- If a customer requests extended credit, tread carefully. Investigate their ability to thrive and make a decision based on the particular situation. This is one area where one standard rule for all customers is not the best approach.
Following these simple rules, and perhaps devising some of your own to suit your business, will prevent problems with debtors who cannot pay. Monitoring your debtors will help your business greatly.
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