| Credit Management Advice
> Quick step guide |
|
| Get your attitude right |
|
| A sale
is not real until it is paid for
Some customers pay on time.
Most have to be reminded.
Some have to be threatened.
The interest cost of waiting for late payment
can be bigger than bad debt losses. It can exceed your net profit.
So do not allow credit to persistent slow payers - They drag you
down
Make enough time for reminders at short intervals.
The sooner you ask, the sooner you get paid |
|
|
| Cultivate large customers
|
|
| A. How many large accounts do you have?
_________________________________ |
B. Their total value is
£__________________________ |
|
C. How many accounts total 80% of B?
_____________________________________ |
D. They owe a total of
£___________________________ |
| These are your major accounts |
1. Check the credit rating of
each firm: revise sales plans if near insolvency or perpetual
bad payers.
2. Cultivate the payments person in each firm: visit, obtain
priority.
3. Match the sales/buyer relationship with a good one between
accounts staff.
4. Give top priority service and action on queries.
5. Phone or fax for payments; donĚt send routine letters. |
|
Your non-major accounts total? (A-C)
E._________________________________ |
They owe in total
F. £_______________________________ |
1. Get a contact name for letters,
faxes and phone calls
2. Collect by letter or fax but phone before legal action |
Back to top |
|
|
| Make your payment terms very
clear |
|
| Sales Negotiation . . . |
State payment terms, with price. Ask "any
problem in paying by then?" |
| Incoming Enquiry? . . . |
State terms boldly on quotation. |
| Order Confirmation . . . |
Include payment terms as prime condition
of sale.
Ensure your conditions supersede buyers. |
| Invoice . . . |
Payment terms to be boldest items on face.
Add actual due date alongside. |
| Statement of Account . . . |
Show payment terms at top.Mark invoices overdue
- print reminder message |
Back to top |
|
|
| Ensure that you get the basics right |
|
Invest time at the outset in understanding the basic principles of good credit management.
Click here to take our quiz to see how savvy you are at managing your trade credit.
Back to top |
|
|
| Open new accounts competently |
|
| If you are dealing with a new customer who
wants to establish a line of credit then it is vital that you begin
the credit management process at the earliest possible date. Ask
for the basic information that you will need in order to assess
whether the risk you are taking in providing them with credit is
commercially viable.
At Account opening stage the business has three objectives:
1. To establish the correct identity of the customer.
2. To confirm that customer's 'ability to pay'.
3. To agree Trading Terms.
These objectives are not difficult to achieve. A simple 'Credit
Account Application Form' can be used to obtain information, and
to set out, on the reverse, the supplier's Terms of Trading. By
signing the completed Form, the customer provides the information
- and agrees the Terms.
Click here for a printable application
form in Zipped Word Document.
Click here for a printable application
form PDF Format.
Back to top |
|
|
| Invoice fast |
|
| Invoice each despatch separately - use 1st
mail. Courier very large invoices.
On very large accounts: phone or fax to agree all invoices received. |
|
|
| Have a clear account display |
|
| Use Aged Debt listing every day. List accounts
in value order - largest first.
Use progress sheet for large accounts to record action and payments
being sent.
Continued... |
