Credit management frequent questions this December
What are the disadvantages of offering credit to customers?
Offering credit to customers is a business risk, unfortunately it is a necessary risk that the majority of businesses need to take in order to remain competitive. By offering customers credit you leave yourself at risk of:
- Lost opportunities due to working capital tied up in debtors
- Bad debts (a debt that is unrecoverable)
- Administration costs of chasing for payment
- The costs associated with ‘lending money’ to customers (i.e. interest on an overdraft facility)
- Necessity of extended credit for your business if cash flow becomes tight due to late payment
Having robust credit control procedures in place will ensure that the risk of offering credit to customers is kept to a minimum; our virtual credit control service can help you to achieve this.
What are your tips for invoice dispute management?
How effectively you manage your disputes will determine how quickly you are paid; therefore you need to have a disputed invoice process in place that will determine the exact details of a dispute, assign it to the appropriate person to resolve and monitor said disputes to uncover ongoing issues. Here are some tips on effective invoice dispute management:
- Keep your customer informed of the progress of their query, this will not only help your customer relationship but will also provide little to no leeway for further delays from customers once resolution is found.
- Ensure all correspondence with customers are kept for future reference, this will help to identify customers that consistently raise invoice disputes.
- If you agree that a credit is required for their invoice, ask for immediate payment of the balance
- Measure your disputes to identify any internal issues that need to be addressed
How can I stop my customer’s poor payment practices?
Poor payment practices can have serious consequences for businesses, therefore putting strategies in place to avoid customers with said payment practices or educate existing customers on appropriate payment practices is essential to the survival of your business. Prior to taking on a new client, carrying out credit risk reporting on them will help in identifying potential poor payers; following this having a robust collection strategy in place will educate your customers on when you expect payment and what will happen if payment isn’t received. If your customer continues to present your business with issues, consider why they are poor payers; are they having cash flow issues? Or are they simply just poor payers without valid excuse?
