The small business specialists
Phone: 13 12 49
Credit management is the process for controlling and collecting payments from your customers. A good credit management system will help you reduce the amount of capital tied up with debtors (people who owe you money) and minimise your exposure to bad debts.
Good credit management is vital to your cash flow. It is possible to be profitable on paper and but lack the cash to continue operating your business .
It is best to minimise the likelihood of bad debts through good credit management practices. Prepare your own policies and procedures for credit management eg. terms and conditions, invoicing promptly and monitoring your debts.
Some terms and conditions to consider include, but are not limited to:
'Retention of title' clauses were sometimes included in terms and conditions but now you register your security interest in goods you supply or lease on the national Personal Property Securities (PPS) Register The PPS Register replaces various commonwealth, state and territory registers with a single online service that covers security interests in assets including stock, vehicles, machinery, office equipment, crops and livestock – almost anything except real estate.
Include accurate details on your invoice for the goods or services supplied, the amount due along with the date and preferred payment method. Always try to resolve invoice queries or disputes quickly.
Maintain your debtors' records to identify any due or overdue debts. Develop a good records management system and keep records up to date so you can quickly identify who owes you money and how much is owed.
Take a proactive approach to credit management by contacting clients a few days before the due date to remind them a payment is due and ask if they foresee any problems with meeting their payment.
Implement your debt collection practices the minute a debt becomes overdue and ensure clients do not exceed their credit limits.