Credit customers are important to your business. They are important because they can either boost or wreak havoc with your sales, and hence, your cash flow. In a recent article, we discussed the importance of knowing how customers pay in setting credit terms.
Do any of these statements sound familiar?
- “They have always paid on time, but payments are getting further apart”
- “They set up a payment plan but have not made any payments”
- “They are good source of new orders but always pay slowly”
- “Their outstanding balance is way beyond their credit limit”
- “They went out of business. Can I still recover the money they owe me”
We have heard all these statements and more from our collection clients. Each refers to a type of credit customer. To recap, there are 5 types:
- Prompt and Regular
- Slow but Steady
- First Round Collections
- Legal Collections
- Never Going to Pay
Our next few articles will examine each of the categories in further detail. Today, we will look at the first two categories.
Prompt and Regular – You never worry about payments. They pay on time. They deserve the most credit at the best terms. These customers are the bedrock of your credit program, and the ones who will best help you grow your business. The only caveat here is to watch to make sure that these customers do not begin to slip and become less regular in their payments.
Slow but Steady – They are usually long-term customers you count on for regular orders who have always paid, just slowly. They are usually 30-60 days behind, but are a good source of business. Grant them credit, with some restrictions, such as a maximum outstanding over 30 days and a maximum overall credit limit. Your contract with these customers should allow for you to apply finance charges and/or late fees. You can use the offer of waiving interest/late fees to get a balance paid off. Also consider offering a discount for prompt payment. If this customer wants a higher credit limit, you may want to obtain a deposit. If they go beyond 90 days, get on the phone and speak to them.
These are customers are your best customers, so treat them as such. At the same time, make certain you are constantly monitoring your outstanding receivables, and make adjustments whenever necessary.