Credit can be a useful way for you to increase the profit of your business, but you have to know the dos and don’ts of credit policies in order to use them in the best way possible. If you are new to using credit for your business, you have to know what sort of policies you should implement and what you should not do. Consider the following tips as you set up your own credit guidelines.
- Do Develop a Policy: If you are planning on offering the use of credit to your customers, you have to set up a policy beforehand. Knowing how things will work ahead of time can help you save a lot of time when the credit is actually in use.
- Do Consider Your Needs: You can’t just set up credit without first considering the cash flow needs of your business. While extending credit may end up increasing your profits eventually, it could also mean that it will take longer for you to get the money you’re owed. Always make sure you have enough money to pay the bills that are coming in.
- Don’t Just Send an Invoice: If a customer missed a payment, and a customer will miss a payment, consider calling them. Sending out an invoice is a great idea, but an invoice is easily ignored. If you call and talk to your customer in person, they will have a harder time ignoring their late bill.
- Do Ask for Specifics: Try to get your late paying customers to commit to a date when they’ll have at least a partial payment in. If you ask them for a specific date, there is a greater chance you will actually see your money.
- Do Listen: Sometimes when a customer is late making a payment, there is something you can do to help them get your money to you. If there is a problem your company can fix, you should do so.
- Don’t Be Too Lenient: It can be hard to be the bad buy, but you can’t let a customer’s obligations slide without consequences. The longer you let an account get away with missing their payments, the harder it will be to collect your money from them in the long run.
- Don’t Get Angry: If a customer keeps making excuses for their late payment, keep your temper in check. Simply ask for a specific time when they will be able to pay and what amount they’ll be able to pay. Try to keep a cool head if at all possible.
- Do Have a Collection Department: Whether you have a dedicated collections department or not, you should make sure the person who made the sale isn’t the same person collecting the money. Often the salesperson will be unable to stay impartial, which can cause issues in the long run.
- Don’t Make Idle Threats: If you say you’re going to turn the account over to an actual collections agency, you should be ready to do so. Don’t say you’re going to do something unless you’re actually willing to do just that.
- Do Work With Your Attorney: Throughout the entire process, you should work with an attorney. Whether you’re setting up your policies or trying to implement them, contact your attorney. He or she will be able to educate you on the state and federal laws regarding collection matters.
If you decide that credit will be able to help the success of your business, you have to be sure you are setting up your policies in the right way. It is best to make guidelines before you start extending credit to your customers. Consider the above credit policy dos and don’ts to help you make the right choices for your company.
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.