In business, cash flow is the blood that swims through a company’s veins. If it runs out of it, it dies. That is why credit management is so important. The bigger the company, the more complex the processes become. There are actions that managers can take to improve the efficiency of credit management, which we will now describe below.

Choosing the Right Software

Making financial decisions inside a company is always a moment where 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 decreases the dangers of entering into wrong partnerships. It makes it possible to do credit checks that will guarantee the safety of your investment by lowering your risk. It will automate processes, from risk management to potential disputes, by creating real-time analysis and tracing dispute cases. But it doesn’t stop there, as it can also help in debt collection. The right software is undoubtedly the primary key to safe credit management inside a company.

Listen to Your Clients and help Them find Solutions

If one of your clients has trouble paying you, you need to remain calm and rational. Too often, debt collection is treated negatively from the start, which creates more problems in the short and long term. Any company can find itself with sudden cash flow issues. That doesn’t mean they automatically become bad customers. If a case pops up, you need to communicate rapidly 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 in which they can settle their due, which will be okay for your firm and theirs.

Increase Pre-payments

Acquiring a customer is not an easy task. Adding a prepayment clause might not be the best way to go about it. 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 cost of the product 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 50% upon reception of the product, or at worse, 30 days later.

A company must make it easy for its customers to pay. It means that they should be offered a variety of ways, from wire transfers to credit card payments, to name only these two. When customers use their preferred method to settle their invoices, it is a more straightforward process for them, which will increase the probability that they will pay on time.

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Hannah is a professional writer who loves to make research on unique topics and express her thoughts by content writing.