No business or economy can run entirely on a cash basis. Most companies run on a credit basis, enabling businesses to grow more quickly. There needs to be a balance in your cash and credit ratios to maintain your financial stability and growth. Credit management is about having policies and practices to ensure credit control.
Here are some credit management techniques you can apply in your business for better credit control.
Routine credit checks
Credit checks are time-consuming and exhausting, so many businesses don’t perform regular credit checks on their customers. However, it can cost you a lot later. Regular credit checks are a vital business credit management technique as they help keep you aware of their financial condition and make better lending decisions.
Have customized credit terms
Don’t apply one size fits all credit rules to customers. Different customers need different policies for different customers. If you have customers with low credit scores or non-payment experiences, offer them more stringent credit and return policies than others. It will ensure you don’t bear losses.
Go digital with invoices
Sending invoices on time ensures that your invoices don’t generate any errors in manual invoices. Electronically created invoices can also be sent quickly to customers via email that they can easily access from their mobiles and laptops. It speeds up the entire process and reduces errors. You can also automate invoice generation to make the process even more streamlined.
Don’t overlook courtesy calls
Courtesy calls are one of the most efficient credit management techniques as it is a simple way to remind the customer to make payments. Don’t wait for the invoice cycle to complete before you start making the calls. You can call early as well to remind customers to make payments. It can help you get payments before the invoice is due and be aware of the customer’s stand on paying the invoice. You can take mitigative measures if there are problems at the customer’s end.
Invest in training
If you are managing your credit internally, it is essential to have a team of individuals who are experts at credit control techniques. If you let individuals without knowledge about credit control handle it, you may lose more money than you imagine in lawsuits.
Hence, it is worth investing some time and money in training your team for credit control and also refreshing their skills from time to time. If your training works, results can be seen in enhanced cash flow and reduced debtors.
Just like you prioritize long-standing clients, you must prioritize some invoices over others. Usually, when recovering debt, companies focus on old invoices. While it is good to remove your oldest invoices, only focusing on them can lose your focus on new invoices that need to be collected. It will create a cycle of unpaid dues that is hard to break out of. To prevent that, prioritize invoices based on the client’s credit scores, invoice amounts, and other factors, along with duration.
Hire a debt collection agency
If you feel all this is time-consuming and prevents you from focusing on your core activities, you can always hire a third-party debt collection agency to manage your credits. You can also take help from Credit management Beauru, like CreditQ, to help you with debt recovery, invoice management, and credit risk management solutions.
CreditQ is India’s first credit management and information portal designed for MSMEs. CreditQ wants the MSMEs in India to have financial independence to grow. We offer Business Credit Management Services and credit risk solutions, enabling you to check the company CIR of your debtors. Login today at our mobile app or website to learn how to check the business credit score of your debtors.