Credit Policy for businesses and how to extend credit and manage credit risk

• Not checking customers’ credit history before extending credit.
• Not getting a credit application, agreement, or contract in writing and signed.
• Not being familiar with the FDCPA and unintentionally “harassing” a debtor.
• Overlooking small balances.
• Not asking for the money that is owed because they hate asking for money.
• Not knowing when it is the right time to turn a debt over to a collection agency.
• Not having a credit policy in place and enforcing it.
• Extending credit to anyone who walks in the door or calls on the phone because they “sound like they will pay.”
• Not taking action on NSF notices or bad checks.
• Not using letters and forms to collect on past due accounts.
• Not having a credit application.
• Not pulling credit reports and checking references.
• Not understanding how to communicate with customers so they stay current.
• Not having a budget and controlling cash flow.
• Not knowing how to effectively do business online.
• Not using small claims court to their advantage.
• Not using discounts and incentives to persuade customers to pay early.
• Not educating themselves with online resources and networking groups.
• Not understanding how a collection agency can work for them.
• Not knowing how to set up realistic payment arrangements with customers.
• Not knowing what to do if a customer dies or files for bankruptcy.
• Not training oneself or staff.
• Waiting too long to use a collection agency.

If you are aware of these common mistakes you can take steps to avoid them and keep them from happening to you and your business.