Small Business Credit and Collection Problems

Hi,
Many small businesses have the same credit and collection problems as large corporations, only they do not have the staff to address these problems. If a small business owner is experiencing an increasing collection problem, it is important to identify the reasons why. In order to do that here are some suggestions of things to look at:
1) Is there a definitive credit policy for extending credit to individuals or other businesses?
2) When an account is opened, is the time taken to verify the information on the credit application? If there isn't a formal credit application, one might be considered.
3) If NSF checks seem to be a continual problem, investigate obtaining a machine to electronically process checks at point of sale. If that is not an option, make sure all pertinent information about the customer necessary to collect on the check in case it's returned is recorded on the check.
4) Is a maximum limit set on charge accounts? Notify the customer of the maximum limit when the account is opened, and if the limit is exceeded, immediately inform the customer.
Customers of small businesses expect to be paid when they perform services or deliver goods to people and will not be offended when a business owner wants to be paid by them. If they do take offense, they're probably not the type of customer a business ultimately wants. If contacting customers is not a strength, one might consider hiring a part time person to call past due customers on behalf of the business. The final step is to turn delinquent accounts, NSF checks etc., over to a professional for collections. This should be done promptly, because the success of collecting on a past due account diminishes with time.
Tomorrow I'm going to talk about specific types of collection calls.
Until then,
Alan