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

Every time I give a seminar or teach business owners how to create a credit policy for their business one of the things I tell them is that once a year they need to fire some of their customers.

We've all experienced the "bad apple" customer or slow payer, with many excuses and no check forthcoming.  This is very frustrating for any business owner, these customers take up a great deal of your precious time and add little to your bottom line. You give them chance after chance but instead of this problem going away, it goes on and on. If this sounds familiar, you need to take the words of Donald Trump to heart for your sake, your employees sake and the sake of your business.

It is time to "Fire" those customers.

It makes good business sense to "cut loose" the customers that don't pay on time and who take an emotional, monetary and professional toll on you, your employees and your bottom line. Once you do this, you will wonder what took you so long!

Make sure before you fire any client or customer you take steps to ensure you fire them right.  You want your actions to prevent them from bad mouthing you or your business, here are some tips to help make this process almost pain free:

• Be honest with the customer, tell them why you can no longer do business with them, explain that you don't feel you can provide the level of service they require and it would be best for you and them if they found another company to help them that can provide them with the service they need.
• Raise your fees. Sometimes just doing this causes the problem account to go somewhere else where the product or service may be cheaper.
• Don't renew any agreement or contract, once the existing contract expires let the client know you won't be renewing the account or contract and they should find another provider.
• If things get really bad, use the escape clause in your contract or agreement.
• Explain the situation to your employees BEFORE taking action, communication within your organization is key.

Do this at least once a year or when a situation presents itself and you will weed out any problem accounts and end up with a customer base that supports your business and allows you to grow.