Credit Management with checkSURE

Credit Management

Credit management can be thought of in two ways: from a business perspective and also from a personal perspective. A lot of businesses only start thinking about it when their customers stop paying.

However when the customer stops paying the reality is that the situation has moved beyond credit management and is now debt management. The difference is clear and careful Credit management means that debt management will rarely be necessary.

The term, in broad terms is sound sales, backed by effective and efficient revenue collection. This will result in profitable sales. In more detail, it starts with a reliable credit policy. A Credit Policy should provide clear policy guidelines on circumstances in which credit should be granted or refused. It is not sufficient to provide credit to your customers just "because everyone else gives them credit". Effective credit management will enable you to achieve increased sales and market capitalisation, improved profits and a regular supply of new customers.

However if you manage your creditors badly, it is easy to run up long term debts and drastically reduce working capital, which can be fatal to an otherwise promising business venture. Sound management is a balance between sound business growth and manageable risk. A sound strategy on why you want to offer credit to our customers must be backed up by a credit management ethos within your company. These tools and reports must in turn back up this culture.

When vetting potential customers sound credit management dictates one should not rely on any one piece of information: say, a credit reference report, or a bank reference, trade reference etc. It is a mixture of these plus more. A simple but effective policy with manageable procedures will go a long way towards helping your business to achieve higher sales, with minimum associated risk.

For the individual, the following credit management procedure applies: If you are currently behind on your payments, many of your creditors will "re-age" your accounts. This will only happen if you can show that you are taking positive action towards managing your personal credit. This means they will bring your accounts current, which will improve your credit rating.

To effectively credit manage it is important to aim for lower monthly payments. Sound management dictates working with your creditors to reduce your interest, which in most cases helps consumers become debt free in far shorter times. Consolidating debt into a single monthly payment can save time and money, not to mention anxiety.

Finally good credit management states that you should communicate about any potential problems as they occur to stop your credit becoming unmanageable debt. It is far better to let your creditors know if you are experiencing issues in this area than to let them find out through non-payment. Organisation, risk assessment and sound policies are the basis of successful credit management.