Cut Your Credit in 7 Easy Steps

Help! My customers just won’t pay me on time – some don’t even bother to! Cash flow’s bad with money flowing out faster than money crawling in…
Are you to blame yourself? Yes and No. Yes because you allowed it to happen without pre-empting the possibility of the event happening. No because it is your right to be paid for products delivered and services rendered. But just how often do we come across good customers who pay when they are expected to or pay without being asked?
Here are just some ways to cut your credit risk in 7 easy steps and minimize your business from closing down:

1. Pull out your customer statement of accounts
Take a trip down memory lane to visit those customers who just love to see their account with you grow faster than a fixed deposit account. Hang on. That’s your money that’s being tied up here that we are talking about. Sure, it'll bring back memories of the excitement not so long ago when the orders flooded in and business was deemed good because sales figures were good. But without looking at your debtor records regularly, you won't know what hit you until it’s too late. So go find those files!

2. Make the most of your credit given
The easiest way to avoid giving credit is not to do business, but I'll assume that you don't find that a very viable strategy. You can, however, pick customers where you know that it is safe to give credit or reduce giving credit. Know your customers.

3. Use your business financing facilities -- wisely!
Business financing facilities gives those who are fortunate enough to qualify for them great means to fund their business and achieve important business goals. Using these facilities to finance credit given to customers is not practical.

4. Be smart about credit control
Millions of companies unwittingly into a credit crunch simply because they don't keep records or take the time to scrutinize the aging list. Missing out on proper systematic and consistent credit control is hazardous for your company’s financial health. And if you do it well, don't just assume that you will recover your money from the errant customer.

5. Give extra credit
No, I am not talking about the pat on the back. You can actually encourage customers who are good paymasters to spend more with you by upping the credit limited you give them. Customers love knowing that you give them extra credit that is available for them to take advantage whenever they want.

6. Think about next year
There's only so much you can do to cut your credit exposure and collect in a year. If you wait until the last minute to request for payment, you may never get your money at all. With some advance planning, you can get a head start on next year's business plan. Things like checking your credit exposure, withholding and monitoring helps put you in better shape next time around.

7. Celebrate!
With all this planning, your ability to do business is enhanced.