Setting Credit Guidelines For A Small Business

Hi,
A small business owner needs to take the time to set up both credit and collection guidelines, so that the owner has a standard policy for customers in place before the customers ask the business owner if credit could be extended to them. In the business climate of today, a credit policy is an essential component of running a successful business. When setting up credit guidelines, consider the following:
1) Is it really necessary to extend credit at all? An all cash business eliminates numerous costly and time consuming tasks.
2) If extending business to business credit, consider the type of business to which credit is being extended. Net 30 days is a good starting point, but could be changed if necessary depending upon the needs of particular business customers.
3) Set a maximum limit a particular account may charge. It is important that both parties are aware of the limit when the account is opened, in order to make future communication clear.
4) When setting up an account, get all pertinent credit information from the customer. Obtain both business and personal information on the credit application.
5) Run credit reports on both the business and business owner. Call the Better Business Bureau for a report on the business.
6)Get a list of all employees, if any, who have authority to charge on the account.
7) Add a statement to the credit application that stipulates any and all collection costs, including attorneys fees, will be the responsibility of the customer in the event of default by the customer on the account.
8) Post a clear return policy if applicable.
9) Do not be afraid to deny credit to an applicant.
Utilizing a set of credit guidelines will save a business time and money down the road. On Monday I will talk about collection guidelines.
Have a good weekend!
Alan
olympicdebtspecialists.com