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
Showing posts with label extending credit. Show all posts
Showing posts with label extending credit. Show all posts
Friday, April 27, 2007
Monday, April 23, 2007
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
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
Tuesday, March 20, 2007
Benefits of Collection Agencies for Small Businesses
Hi,
Small businesses have two distinct disadvantages over large corporations in that they usually have no credit or collection departments. This results in accounts receivable with no one available to monitor or resolve them. The business owner is generally busy with other tasks, and his or her small staff is usually strictly clerical. Many times credit is extended due to familiarity with the customer rather than by the approval of pertinent credit information. These factors contribute to small businesses having an higher than average collection problem with their accounts receivable. The business owner fears that customers will be driven away if their delinquent accounts are pursued. It is not uncommon for business owners to have tens of thousands of dollars in very delinquent accounts. Another collection problem for small businesses may still be NSF checks, as they may not have the electronic system in place for point of sale verification. Because small businesses lack the staff to effectively collect on NSF checks, it's imperative that they utilize a third party collection system as soon as possible. In most instances, a collection agency is a perfect fit for a small business. Years ago I had a friend who was a salesman for a collection agency. He told me the story of a small business owner who had a shoe box with dust on it full of NSF checks. It took many, many visits before the salesman was able to convince the owner to give up the shoe box. When he finally did, it contained over 120 NSF checks, some over three years old. Within two weeks, the collection agency had collected over $6,000. of the checks for the business. This is one example of many in which accounts receivable or NSF checks gathering dust are not putting any dollars back into the business. In dealing with NSF checks in particular, the chances of recovery diminish with each passing month. As a small business owner, it is always important to remember that you are entitled to be paid for your goods and services provided to your customers. When you have the need of utilizing outside collection services on your accounts you are exercising your rights as a businessperson. Tomorrow, I'll talk about NSF checks.
Until then,
Alan
Small businesses have two distinct disadvantages over large corporations in that they usually have no credit or collection departments. This results in accounts receivable with no one available to monitor or resolve them. The business owner is generally busy with other tasks, and his or her small staff is usually strictly clerical. Many times credit is extended due to familiarity with the customer rather than by the approval of pertinent credit information. These factors contribute to small businesses having an higher than average collection problem with their accounts receivable. The business owner fears that customers will be driven away if their delinquent accounts are pursued. It is not uncommon for business owners to have tens of thousands of dollars in very delinquent accounts. Another collection problem for small businesses may still be NSF checks, as they may not have the electronic system in place for point of sale verification. Because small businesses lack the staff to effectively collect on NSF checks, it's imperative that they utilize a third party collection system as soon as possible. In most instances, a collection agency is a perfect fit for a small business. Years ago I had a friend who was a salesman for a collection agency. He told me the story of a small business owner who had a shoe box with dust on it full of NSF checks. It took many, many visits before the salesman was able to convince the owner to give up the shoe box. When he finally did, it contained over 120 NSF checks, some over three years old. Within two weeks, the collection agency had collected over $6,000. of the checks for the business. This is one example of many in which accounts receivable or NSF checks gathering dust are not putting any dollars back into the business. In dealing with NSF checks in particular, the chances of recovery diminish with each passing month. As a small business owner, it is always important to remember that you are entitled to be paid for your goods and services provided to your customers. When you have the need of utilizing outside collection services on your accounts you are exercising your rights as a businessperson. Tomorrow, I'll talk about NSF checks.
Until then,
Alan
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