Customer credit management is essential for any business. Credit has a direct impact on cash flow, whether you are a small or large retailer, or a wholesaler or distributor. If you do not have better credit collection practices in place, your business will suffer.
¨Improving your customers’ credit may not seem like an important thing, because without the need to borrow, a healthy credit history is meaningless. Yet it can help you cut costs and make your customers more likely to pay you on time, saving you money in the long term.¨ Here are a few tips on how to improve credit for customers.
Trust Your Business Instincts
Customers frequently offer excuses, and we’ve heard many of them. While excuses cannot be refuted, you are within your rights to examine their reasons and, if possible, request verification. If you receive statements from customers who appear to be postponing payment, question their explanation once more. They may be advising you, for example, that the invoice would be mailed later that day or perhaps after that week. Request a specified timeframe or call them back later to resolve the issue. Don’t forget to prioritize the more challenging clients; if a customer has a history of invoicing being late or asking for time extensions on several occasions, it’s in your best interest to keep them on your radar, even if they are now paying on time.
Promote Early Payment
Early settlement can be promoted at the most basic level by making it as simple as possible to pay invoices. As an example, ensure that all your financial information is displayed on all invoices, as well as accepting a variety of payment methods, most notably online payments. Incentivizing payment is another method of promoting on-time payments. In terms of incentives, you might offer those riskier consumers early settlement reductions if they pay within the stated credit periods. Additionally, it can be advantageous if specific clients pay a portion of their invoice on time rather than paying the entire amount late. If you believe this will influence your profit margins, these incentives can be built into your price structure.
Invoice Promptly and Accurately
Improving your credit control operations begins with prompt and accurate invoicing. Additionally, there are several relatively straightforward ideas that can assist your corporation in increasing the efficiency of this process:
- Issue bills immediately upon order fulfillment
- Invoices sent via email rather than postal mail
- Verify that the invoice is addressed to the correct individual.
- Verify that the invoices are error-free.
After sending bills, it’s worthwhile to check receipt since this can assist in resolving possible issues early on. Additionally, you’ll be able to find a reason to contact your consumer and establish rapport with them.
Establish a Well-Defined Credit Control Process:
It is important to have an accelerated insight platform. It is critical to establish a well-defined and coordinated credit management strategy. Late or missed payments can put your business at risk of incurring bad debt and are frequently easily remedied with a gentle nudge or reminder. With credit control being so critical, it is essential for businesses to establish a realistic payment schedule to avoid payment delays. This schedule should cover all stages that must be completed and followed by various team members inside your firm.
Make it Straightforward for Customers to Pay:
It’s all too easy for customers to use the “the cheque is in the mail” excuse, and the best way to prevent this is to study various payment ways you may offer them.
You might consider the following:
- Checks
- The BACS
- Debit or credit card
- Money
This provides options for the consumer and significantly increases the percentage of bills paid on time.
Be Consistent With Your Terms and Conditions
Errors will occur if your times are unclear. Ascertain that you present a new customer with clear and consistent conditions when you begin working with them. These should detail any or all terms associated with invoice payments to ensure that the process is as transparent as feasible. Not only should the conditions be transparent to existing consumers, but they should also serve as a guide for your side of the transaction. To maintain cordial relationships with your consumers, both parties must act consistently. Ascertain that your conditions clearly describe your policy on late payments and the actions that may do in the event of a late payment issue.
Forecast Your Cash Flow And Keep It Current
While forecasting is never a completely trustworthy source of information, it will present you with an overview of expected revenue and the funds required to pay off any anticipated debts. It is an important part of retail consumer financing. Once it is confirmed whether the debt will exceed its credit conditions, it will be easier to make adjustments or address existing issues. Once you’ve predicted your cash flow, it’s critical to keep it current to avoid unpleasant shocks in the following months.
Create A Watch List And Take Action
Due to the complications that arise when invoices are not paid on time, you should never disregard them. If a particular customer frequently pays late, it’s critical to keep an eye on this. Consider including them on a list of ‘businesses to monitor.’ This will ensure that you conduct the proper due diligence in the future when selling to them. For instance, you could decide to offer credit to customers or give credit conditions to those companies on your watch list only if they pay a deposit. While customers may have good reasons for not paying invoices, do not be hesitant to pursue chronic offenders.
Conclusion
The techniques mentioned above are a must-know for all business owners looking to create good credit records for their customers. Turn them into an effective tool in your business to keep profits healthy.
