Tips for Customer Focused & Effective Credit Management
Small businesses need to ensure they have the most effective credit management systems and skills to tackle late payment seriously, to avoid becoming one of those statistics. If late payment isn’t tackled effectively, the effect on businesses and ultimately the economy could be disastrous.
Research shows it costs 10 times more to gain a new customer than to keep an existing customer.
Yet many companies take a ‘sledge hammer’ approach to collecting payment from their customers. They get paid but also lose their existing client base in the process, destroying future business.
Credit management should be ‘customer focused’. To ensure your company’s collection activity adds to the business relationship, follow these suggestions-
• Take a customer-focused approach to collections, remaining polite and professional, but also persistent.
• Manage disputed invoices by setting a time limit to resolve issues.
• Give new and high-risk customers a ‘customer service’ call before the invoice is due and find out if there are any issues which may delay payment.
• Use Late Payment Legislation as a negotiating tool to get paid more quickly
Credit control should no longer be the ‘anti sales’ department by the rest of the company, they should work with all areas of the company to provide good customer service whilst improving cash flow and reducing bad debt exposure.
The courts are full of unenforceable judgements because claimants didn’t take the trouble to find out who they where trading with at the beginning of trading relationships.
Here are some suggestions to follow to be successful, if litigation is required to get paid-
• Use credit application forms to get all relevant information
• When dealing with sole traders and partnerships, get full names of owner/partners and home addresses.
• You need the date of birth of individuals in order to get a county court judgement. Individuals include sole traders & partnerships.
Many smaller businesses are often so focused on sales, they forget about the risk of their customer going into receivership and suffering a bad debt.
It is vital, in order for companies to survive in the current economic climate that they reduce their risk of bad debts as much as possible. Here are some suggestions to limit your risk-
1. Credit check new and existing customers regularly. Set credit limits and review them monthly. to reduce the risk of bad debt.
2. Subscribe to a ‘monitoring service’ you will be informed if there are any changes in the company’s details such as CCJ’s or the filing of new accounts.
3. With new start ups where there is often little information available to assess credit risk, check to see if the directors are directors of other companies and credit check them.
In these uncertain times, world, all companies need to remain customer focused whilst ensuring they get paid in full and on time. With a positive cash flow, maybe all companies will be able to pay all their suppliers on time and reverse the ‘late payment culture we have in the UK.
Our outsourcing service provides effective credit management in a customer focused way, we will always add to your customer relationship through our chasing, not detract from it; find out more today.
