Effective Credit Management Tools
You will find this section on effective credit management tools essential if you are starting or running your own business.
It’s a commonly enough used term, and yet despite being vital for the survival of business most people don’t actually know what it is, what it means or what it involves.
Credit Management is a wide-ranging generic term, which covers the entire processes, systems, methods and actions that you take in your business in order to manage the Credit you provide to your clients.
Without effective credit management tools and processes in place, the chances are your business will run out of cash, and ultimately fail.
Managing your risks
As soon as you enter into business with someone whatever goods or services you provide, you are in effect risking that value, because there is always the chance you might either not get paid or will be paid late, leaving you out of pocket.
A vital (and often over-looked) factor in business – is that increasing sales are all well and good as an objective - but sales are not what makes money for business. Getting paid is! Most people setting out in business make the mistake of assuming that they will automatically get paid.
Your Credit Management processes should involve every stage of dealing with your clients from the moment they are a prospective client, by assessing the risk to your business, through to negotiating terms and conditions, invoicing effectively, and ultimately Credit Control, and Debt Collection.
Each of these essential functions of your business will be dealt with in more detail, on separate fact sheets, but the fundamentals around Credit Management, are assessing and ensuring you understand your risks, and that you effectively manage the credit you provide, which ultimately will keep your business running with a healthier cashfow.
Chasing For Payment
Managing Your Cashflow
Payment Terms Definitions
Special thanks to Dan Glickman of Moneytree Associates for his support and advice in the preparation of the credit management section
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