When it comes to credit, you kind of get a mixed bag: on one hand credit is important for attracting new customers and retaining old ones; while on the other credit could stifle your cash flow and make it very hard to operate. But either way no business can operate without it: you’ll buy from suppliers on credit and sell to your customers on similar terms.
Debtors are a good thing to have (they are assets) but debt recovery can be one tasking job. Making enquiries, following up on late payments, calculating penalties and sometimes even taking legal action against debtors makes the process costly, both in terms of time and money. And at the end of it all you might end up not getting paid. But does it have to be this way? Actually, no. There is a simple solution to this: credit account management.
You have the option of handing over your entire credit account to a third party and let them handle all the details regarding debt recovery. Because these firms are specialised for doing exactly this, their processes are much more efficient and effective.
How will credit account management save you money?
By using credit account management you can help your business save significant amounts of money. Some of the areas you’ll enjoy savings on include:
1. Bad debts. Defaulters are every business’ worst nightmare. By taking goods and services and not paying for them, these customers reduce your business’ working capital. Credit management will help you avoid defaults in payment by making follow-ups and using suitable debt recovery mechanisms to ensure that you get your money back.
In addition, the firm that manages your credit account will offer valuable information and advice regarding the creditworthiness of a customer so that you can make an informed decision on whether to sell to them on credit or not.
2. Interests. When your credit account is not managed properly, your debtors may not pay you in time. Delayed payment negatively affects your cash flow necessitating borrowing (loans) to meet short-term financial requirements. By employing the services of a credit account manager, your account will be well managed to ensure that your debtors pay on time. They’ll also provide accurate forecasts on payment so that you can make the necessary plans to avoid disruption.
3. Employee salaries: By using credit account management you’ll be outsourcing all matters regarding credit to another firm. This means that you don’t require employees within your company to do that work. It will cost less to have your credit account managed outside than to hire employees to do it in-house.
Providing credit terms to your customers could either be beneficial or detrimental to your business, it all depends on how you handle your credit account. By using credit account management, you are handing over one of the most important areas of your business to people who have the necessary skills and experience to handle it effectively. This ensures that credit issues never affect your business.
Ask us how we can help you: https://www.creditworks.co.nz/contact