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

Today I am pleased to have Krista T Walsh the President of KC Collect! and a member of my Credit & Collections Association as my guest blogger! 

Many business owners, especially NEW business owners, are so eager for a sale that they neglect document or discuss payment. The business does want to offend the new customer by asking for a method of payment. If it is difficult for a customer to obtain credit, they will take their business elsewhere. Lack of proper credit policies is the major reason that businesses have overdue accounts. Small Businesses are infamously guilty of having a week or non-existent collection policy. Some businesses have a policy, but use it inconsistently, which yields less than favorable results. As one of the keys to any successful business, receivables management must be taken into consideration when venturing out as an entrepreneur. Unfortunately this key element is often overlooked as the entrepreneur’s attention is pulled in different directions.

If you obtain as much information as possible from the customer when extending credit makes recovery of the account more likely if it becomes past due. In order to successfully manage debt it is customary to ask potential customers for credit references. In smaller communities it is suggested that you network with fellow companies, thus creating a mutual exchange of information. Most companies are more than willing to share information on past delinquents to help you to learn from their mistakes.