In the existing economic climate, numerous companies may encounter significant challenges with cash flow. It is imperative for these businesses to proactively prevent delinquencies and promptly collect receivables to ensure their survival. To enhance your understanding of credit management and fortify your business against risks, here are 7 valuable tips for improved protection and risk prevention.
1. Get a direct contact within the company, extending beyond the sales team.
Distinguishing between sales management and credit management is crucial, as they serve distinct purposes. It is recommended to institute transparent credit policies encompassing terms, limits, and payment deadlines for customers, with upfront communication to prevent misunderstandings.
Additionally, contemplating the provision of discounts or incentives for early bill payments is advisable. This strategy can effectively motivate customers to adhere to timelines, subsequently enhancing cash flow.
2. Investigate the company
Prior to finalizing credit terms, it is essential to assess the creditworthiness of potential customers through an examination of their credit history, credit score, and payment track record. This proactive approach aids in steering clear of customers with a higher likelihood of payment default.
If your resources are limited, Coface offers a solution. Explore our Business Reports, Credit Score, or Credit Opinion services to effectively handle and mitigate your credit risks.
3. Stay informed through peer interaction
Engaging with a trade association or professional federation in your industry allows you to actively monitor your business partners by engaging in conversations with individuals who collaborate with them.
4. Insure your business transactions
Safeguard your business through credit insurance, outsourcing portfolio evaluation and monitoring, ensuring guaranteed payments, and gaining access to debt collection services.
> More on Coface's credit insurance solutions
5. Exercise caution in granting credit overruns
Promptly follow up with late-paying customers to avoid prolonged delinquencies. The lack of assertiveness early on could have repercussions.
6. Retain or request proof of delivered goods or provided services.
Retain or request documentation confirming the delivery of goods or the provision of purchased services. It is crucial to eliminate any potential excuses for delayed payments.
Exercise vigilance, and when entering special payment agreements, maintain a degree of flexibility while meticulously documenting all terms and diligently following up.
7. Utilize specialized tools for credit monitoring
Explore the adoption of technology for automating credit management tasks, including credit checks, invoicing, and payment reminders, to enhance operational efficiency and minimize errors.
Consistently monitor your customers' credit to verify their adherence to payment commitments, facilitating early problem identification and corrective measures.
Coface provides effective monitoring solutions, ensuring prompt notifications of any changes in your client's situation.
Bonus tip: seek professional advice
If you have uncertainties about the best practices in credit management, seek advice from a financial professional or a credit management expert, such as Coface. We offer guidance on effective credit management to mitigate business risks. > Contact us now!