Here are six simple steps for credit management beginning with “RE” to help you maintain a healthy cashflow and avoid bad debt.
Always start by researching the credit history for new customers. A credit report will highlight any adverse information to help you make informed decisions in safeguarding your cashflow and minimising bad debt.
Following up with timely reminders will encourage prompt payment so try emailing a reminder the day an invoice is due, sending a statement after seven days and after 14 days with a phone call. Provide an invoice on delivery and ensure all details are correct.
A customer’s positive credit history won’t always stay the same. You can receive alerts and be notified about important changes simply by setting up customer monitoring and reviewing their credit profile on a regular basis.
When important changes are brought to your attention that a customer has defaulted with another company or has received a winding up notice, respond to them immediately! Check in with your customer to see how they are tracking financially and consider revising their credit terms.
Be sure to let slow and non-payers know that you take debt seriously. Displaying a CreditorWatch membership logo on invoices and statements or sending a letter of demand will increase the chance of getting paid on time and recovering bad debt.
When all steps have been taken to retrieve payment, it’s time to register a default. A default is a black mark that is added to a debtor’s credit file for others to view, it will affect their credit rating and alert companies that are trading with the slow or non-payer.
Remember the steps
RESEARCH the credit history for all new customers and REMIND them for prompt payment. REVIEW their activity regularly so that you can REACT to important changes to RECOVER bad debt. When you cannot retrieve payment, REGISTER a default to warn others.
Colin Porter, Managing Director, CreditorWatch