In business, cash flow is the blood that flows through a company’s veins. If it runs out, it dies. That is why credit management is so important. The bigger the company, the more complex the processes become. Managers can take action to improve the efficiency of credit management, which we will describe below.
Choosing the Right Software
Making financial decisions inside a company is always a moment when you can place the company at risk. Yet, you have to do it regularly when choosing suppliers or accepting new clients. That is why you need to be able to control these companies before you enter into a relationship with them. Choosing software such as SAP credit management automatically reduces the risks of entering into unfavourable partnerships. It enables credit checks that ensure the safety of your investment by reducing your risk. It will automate processes, from risk management to potential disputes, by creating real-time analysis and tracing cases. But it doesn’t stop there; it can also help in debt collection. The right software is undoubtedly the primary key to safe credit management within a company.
Listen to Your Clients and Help Them Find Solutions
If one of your clients is having trouble paying you, remain calm and rational. Too often, debt collection is viewed negatively from the outset, creating more short- and long-term issues. Any company can find itself with sudden cash flow issues. That doesn’t mean they automatically become the wrong customers. If a case arises, you must communicate promptly with the client to understand the situation. Maybe the problem is as simple as a lost invoice. If it isn’t, and the company needs more time to settle the bill, suggest a solution that will be precise. It is essential to define a timeline within which they can settle their dues, which will be acceptable to both your firm and theirs.
Increase Pre-payments
Acquiring a customer is not an easy task. Adding a prepayment clause may not be the best approach. However, it is a frequent request in new business relationships. Therefore, you should not be afraid to include it. The best way is to provide something in exchange. That may be a reduction in the product’s cost or an added service. Cash flow being a key to survival for companies, it is better to be paid in advance, even if that means losing a percentage of the total sale. Managers can also choose a 50/50 method, where the customer pays 50% in advance and the remaining 50% upon receipt of the product, or, at the latest, 30 days later.
A company must make it easy for its customers to pay. This means offering a variety of options, from wire transfers to credit card payments, to name just a few. When customers use their preferred method to settle their invoices, it is more straightforward, increasing the probability that they will pay on time.
