October Credit Management FAQs
Here are our top credit management FAQs for the month of October.
How will I know when to put a customer on hold for non-payment ?
Your decision to put a customer on hold for non-payment will depend entirely on your collection strategy. If you don’t have a definitive collection strategy in place, consider how long it would be before you would consider an overdue payment unacceptable. This may be a two weeks, three weeks or perhaps a month overdue, however you should take into account the amount of risk your customer poses to your business by being overdue on payment, and this should lay heavily on your decision of when to put them on hold, my main advice in these situations is not to wait too long to take the necessary action. I would recommend a week before you place your customer on hold, to send them a notice of what will occur if payment is not made; from my experience this notice will often spur them into making payment.
For more advice on putting your customer on credit hold click here
How would a course in credit management benefit me?
A course in credit management is ideal for anyone working in the financial aspect of a business, or indeed the managing director of a business. Depending on which aspect of credit management you would like to gain more knowledge of, be it taking legal action, improving collection performance, insolvency, our credit management courses will provide you with the knowledge and know-how of credit management best practice that can be easily applied to your business directly. Take for example our improving collections performance course, the biggest praise we receive for past attendees is the significant increase in confidence when undertaking collections for a business and therefore they have received more return on their chasing.
Take a look at our courses here
What are the pros and cons of factoring?
For some businesses factoring can be a great solution to keep cash flow positive; however, from my experience, factoring companies (who chase for payment on your behalf) are fairly ineffective at chasing for payment and I have known customer relationships to be poorly managed due to this. That being said, I would recommend looking into confidential invoice financing if you are eligible (same principal as factoring but you chase for payment yourself and finance fees are usually lower than a full factored service ).
Take a look at our blog on invoice finance
Why should I be setting credit limits for customers?
Setting credit limits for customers is essential for managing risk of bad debt. We have compiled a list of benefits of setting credit limits in our blog – take a look
What should I look for when credit checking potential customers?
Whichever credit check company you use, you will be provided with a detailed report containing lots of information that you may not necessarily have any understanding of what aspects are important to look at. Knowing what you should be looking at in particular in a credit risk report and making the appropriate decision based on this can greatly reduce your risk to late payment. However, I should stress that a credit risk report does not provide certainties as to whether or not you will be paid, it will merely give you an indication of a company’s past and current financial standing at the time, and any adverse indicators such as CCJ’s etc. Many providers also give an indication of current payment performance that may give you a better understanding of your customer’s current position. However, be aware that this information may very well change at any given moment; therefore I would recommend putting your customer on monitoring, so that you can be notified straight away if your customer’s credit rating changes.
View our blog on what to look out for when credit checking customers
