Most business owners no matter how big or small still get excited about a new account. They also normally have some type of new account procedure, though not always. When you don’t have any guidelines to follow when you obtain a new account or customer, things get sloppy.
You know you work hard to get a new customer or new account. You advertise, maybe offer specials to get them to come to your store, shop or website or buy your service. When they get there you don’t want to scare them away, so you might just make the sale and when they ask to come back and pay later, you are all gung ho! BAD IDEA! If a customer is scared away because you ask for information from them or ask them to sign a credit application or contract, that is a customer you don’t need.
During my years doing debt collections I can’t tell you how many small or very new start-ups have frantically contacted me about an unpaid bill from a new customer. To a small business one customers past due bill can make or break them. PROTECT YOURSELF!
Think of your business as your child, it needs you to look out for it. When you don’t extend credit wisely, you don’t just affect yourself, you affect your business’s cash flow, your employees and your paying customers. When you have to write someone’s bill off to bad debt, that money has to be made up somewhere. This can be in the form of higher prices for your customers or no raises that year for your employees. This is called letting your customers control your cash flow.
No smart business person will let anyone else (except maybe their accountant) control how much money they make and have. Make sure to have every new customer fill out a credit application and do not extend credit when you shouldn’t.
If you do this, you will be in control of your business, your cash flow, and have happier customers, employees and a good reputation in your industry.
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