Many small businesses don’t give attention to their credit processes until it’s too late. Now is the best time to do something about this – a brand new year to sit back and review your credit procedures. This article discusses some of the issues you can consider when reviewing your processes and reduce risk to your business. Every business is different, and you should consult a professional if you need specific advice on your situation.
Resolution #1: I will reduce my debtor’s ledger
The holiday break can be a tough time for small businesses and cash flow. Projects start slowing down, customers leave for holidays yet staff expenses increase with annual leave and penalty rates. It’s important to keep on top of your debtors to make sure they don’t fall behind. If you need help with collections, call in a professional debt collection agency to help you reduce your bad debt and improve your cash flow.
Resolution #2: I will review (or implement from scratch!) credit approvals processes for my business
Every business that extends credit needs to have processes to handle this. However, as a credit management professional, I constantly come across businesses who give out thousands of dollars of goods without even knowing who they’re dealing with. The best way is to implement an effective procedure in your business for credit approvals and reviews. Make sure the process covers your credit applications, documentation, credit checks, approval limits and ongoing review. Most importantly, ensure you and your employees always follow these procedures!
Resolution #3: I will make sure my customer data is up to date
It’s important to know who you’re dealing with at all times. Even if you do the checks during the approvals process, make sure you keep this information up to date. Quite often, businesses change hands, structures change or businesses move premises. Keep all the details (entity name, trading name, ABN, business premises and contact details) up to date in your accounting or CRM system.
Resolution #4: I will set up alerts to monitor my customers
One of the best ways to keep up to date with your customers is to set up alerts. Alerts will notify you about status changes on your customers. The Australian Securities and Investments Commission (ASIC) offer a free service to set up alerts on companies. Credit Bureaus such as Equifax or CreditorWatch also provide alerts which can warn you when your customers start defaulting elsewhere.