This post is a recap of a webinar hosted by InfoTrack and CreditorWatch.
Acquiring new customers is great for your business but what’s better is knowing that they will pay you on time. Having an effective credit management process in place can make all the difference to your cash flow. Here are some steps to better manage customer credit risk and reduce bad debt.
Always perform credit checks on your customers
Before providing goods and services to new customers, it’s important to know who you are dealing with. You can easily search for a business to view their credit report. Here you will find a comprehensive overview of information to determine their creditworthiness and any adverse data regarding their payment behaviour in the form of previous payment defaults, court actions and mercantile enquiries.
Monitor a business to be alerted when changes occur
Business credit reports and scores are dynamic meaning a business’s positive creditworthiness won’t always stay the same. Business credit monitoring keeps you informed when important changes occur, such as when a payment default is registered, if there is a mercantile agency enquiry or an ASIC initiated strike off action notice. These changes act as an early warning, helping you be proactive in making a decision to reduce credit risk.
Provide accurate invoices and follow up with timely reminders
Always provide an invoice when you provide goods or services to a business. Ensure all details are correct as minor inaccuracies can lead to issues if ever you need to refer to a debt collection agency or have to pursue legal action. Establish a system of following up customers with prompt statements and friendly reminders for outstanding invoices. Depending on your industry, you can set up automatic reminders to follow up after 4 days with a statement, and after 10 days with a phone call.
Take action when you don’t get paid
If your customer still hasn’t paid you after an invoice and all reminders have been sent, it’s time to send a letter of demand advising that you will register a default if you do not receive payment. A payment default is a black mark that remains on a credit file for up to five years. It’s a great way to encourage slow or non-paying customers as they will fear ruining their credit score and deterring other suppliers.
Click here to view the full webinar recording.
