“A man is usually more careful of his money than of his principles” – Oliver Wendell Holmes
If you’re a business owner or someone who is involved in business accounting, you know how hectic the last month of the financial year could be. In Australia, June is the month when huge things happen in accounts departments: businesses have a hard, long look at the numbers, cash collections and expenses, missed/or met budgets, profits and losses. June is for many businesses month with large cash collections (as every other business is trying to pay their liabilities to reduce the tax obligations for the year). Unfortunately, June is also for many businesses a month with huge amounts of Write Offs due to uncollectable accounts.
If the picture is not so rosy in the accounts department, there is no better time to actually think of making some changes in the credit collecting area starting NOW!
This is the perfect time to plan your credit management for the future to keep your business financially protected and profitable. The best business credit management solutions include all of these often overlooked “must haves” for successful credit management.
- Credit Risk Evaluation (Defined steps that properly evaluate credit worthiness of customers/clients and procedures that deal with preventative measures and possible ways of reducing the risk of bad debtors.)
- Proper Staff training on business structures and processes (Prompt payment is an issue for everyone involved in the management and customer/client relations areas of a company, Every staff member should know their role in the business and how their role plays a part in the final financial outcome of the business – big picture. The final profit and loss of the business is the outcome of input of all staff, and this should be explained in advance with charts, processes, and real life examples. All staff need to grasp how all fit in the big picture of cash flow. This little advanced training does wanders in the accountability and self appreciation of the staff).
- Bad Debt Risk Reduction Plan (Smart businesses have a bad debt reduction plan as a part of their Credit Management system. There are many different techniques that are being used. Part Payment technique, for example, is one that is being used the most extensively. How it works? Businesses ask risky customers/clients for an advance before providing goods or services. credit is then allowed on the balance only. This plan than works for both, the provider and the consumer as underlines the time schedule and the exact financial commitment. The bad debt risk is reduced and the customer/client has been given time to organise payments accordingly).
These three areas are often completely bypassed by small businesses, and most probably completely undervalued in the importance in the credit management steps. As the new financial year is just about to start, there is no better time to give it some thought and incorporate them in your Credit Management Plan for the future.