For any running business enterprise, it’s necessary to maintain a healthy cash flow cycle. It’s equally important to have a smart credit management strategy that helps you avoid risks and financial debacles. If you’ve given funds to other businesses, you may want to make the right move by improving your business credit management so that you keep up with the market demands and never run out of cash.
This blog makes you familiar with smart ways concerning the credit control process. Let’s begin.
Be clear and transparent
For MSMEs, it’s essential to define payment terms to their vendors and suppliers. From the time an order is created to the moment the invoice is paid, you need to keep a check on the process. You should bring transparency in the process so that there are fewer to no errors and discrepancies that could lead to a payment dispute. It starts with coordinating with your suppliers and communicating clearly about your needs and business demands.
We suggest that you build a day-to-day strategy as you may have to coordinate with your vendors regularly, and it seems relevant if things go in order right from the beginning.
Review your client’s business performance
Before granting credit to a new client, you should review their business credit report. It will provide you a fair idea about their financial performance and their financial habits, including the repayment procedure. As a smart businessman, you would want to avoid the risk of fraud. Recovering money from a payment defaulter could be tricky, and you want to safeguard your business against such cases.
Define late payment terms
If you want to excel at business credit management, you need to differentiate between good debtors and business credit defaulters. If you’ve got a healthy rapport with a vendor who makes payments on time; however, he or she has failed to do in the past few months, you can either make courtesy calls and ask them to pay on time. However, if you’re not convinced of the reasons given by your payment defaulters, it’s better to report them on the CreditQ platform. Not only will you be able to settle payments with your defaulters, but you can also get the advantage of improving credit management.
Communicate your credit policy to your customers
As a startup owner, you may find difficulty in managing a decent cash flow cycle. Maybe you’ve taken credit more than required, or you’ve funded other businesses and now experiencing a cash crunch. To avoid such cases, it’s wise to communicate your credit policy to your suppliers and buyers. If you’re able to reach your customers with clarity, they would reciprocate your gesture by making timely payments and understanding your business needs. Your business credit management report should be impressive.
Know your limits while offering credit
You may end up lending more funds than desired, owing to your good rapport with a particular client or vendor. However, it may not be good for your business in the longer run. Remember, you need capital for your business at all times, and a decent cash flow cycle is always beneficial. But if you fail to maintain so, you may end up risking your financial power, and when it’s time for you to seek credit, your poor credit information report won’t allow you to do so. It could be hard for you to find a trusted lender or investor. So, you should know your credit limits in advance.