Resolutions. We make them. We break them.
These credit and collections resolutions, however, are easier to keep, as they do not involve huge changes. Some simple adjustments will make a big difference in your 2020 cash flow.
Gather information on customers and keep it updated.
In order to have an effective credit program, it is important to know your customers and how they pay. It only takes a few minutes to obtain basic information on a new customer, and it is well worth the effort. Use each contact with the customer as an opportunity to update or add new information.
Amend your customer contract to help you lower your cost of collection.
I am often asked by customers if I can add my fee onto the debt, and collect it. I can and do collect it if (and only if) the customer has agreed in writing in advance to pay the costs of collection. It is not enough to have a statement on an invoice.
If you have a signed agreement, you can recoup some or all of your costs. State laws vary as to the amount you can recover. In all cases, however, you must get it in writing.
Commit to a regular accounts receivable review. Adjust credit terms when necessary.
Stay on top of your receivables. If you make it a habit to review the aging of your accounts receivables, it will become apparent which customers deserve the best terms, and which customers will need to be limited or cut off entirely.
If a customer pays quickly you may decide to raise their limit. Similarly, you may find certain customers need to be limited due the seasonal nature of their businesses.
Remember that you do not have to grant credit to customers. Credit terms will make you more competitive and can actually help grow sales, but they have to work for you.