When it comes to debt management, don’t be ‘Mr Nice Guy’
When times are tough, you can’t afford to let money owed to you blow out to 60 or 90 days. There is no advantage to being the nice guy who is last to get paid and misses out altogether.
Think of yourself as a banker to your customers, lending them your money on credit. Although it’s not possible to prevent bad debt entirely, there are steps you can take to ensure your business isn’t badly affected by debt.
The successful collection of accounts receivable greatly depends on the quality of the credit your business is granted in the first place. This is dependent on having a professionally written credit policy in place. Ensure you’ve undertaken information-gathering about your customer before opening an account, and that all customers have the latest copy of your credit policy and understand your payment terms, credit note procedures, and how payment is to be made.
Your credit management system should enable you to easily identify who are your slow-paying clients and their credit-worthiness. The process should involve credit-checking potential customers and screening out the risky ones. It should have a dated record of all transactions and include customers’ reasons for late payment and when to expect payment.
If you don’t have an in-house accounts receivable capacity, determine how outsourcing debtor management services would fit into the bottom line. Weigh up the cost of the service balanced against the prospect of improved payment rates and the convenience of somebody else managing your debts.