One of the best ways to deal with future trouble is to have a plan in place to avoid it altogether. Too many companies are so anxious to land a customer and begin supplying their product or service that they fail to analyze the credit history or financial position of the potential customer. If you value your business and your money, be sure to conduct a credit worthiness analysis of potential customers before granting them credit and starting a business relationship with them.
A customer who can’t pay you for the goods and/or services you provide can do significant damage to your bottom line. And if you don’t conduct proper credit checks, you would hold a great deal of the blame for the harm done to your cash flow. Your due diligence from the start can save you serious financial grief down the road.
Every company should establish a firm credit management policy and adhere strictly to it. This is a crucial tool for reducing risk to your company. The credit management policy should define credit extensions limits, the process of evaluating and assessing customers so as to avoid undue risk, how credit limits will be defined or redefined for customers you’ve had for a long time, and a standard for regular reevaluation of customer risk profiles.
It is important, though, to have a proper credit management process in place:
1. Without proper credit analysis – the company is exposed to risk
2. Low credit limits impact profitability and customer acquisition
3. High credit limits impact working capital and cost
4. Therefore, fixing the right credit limits is important.
Balance, therefore, is necessary in formulating your policy. Overall, it is up to you to empower yourself by diligently evaluating the credit worthiness of all potential customers so as to ensure you reduce your risk.
The Jayaram Law Group routinely and successfully assists its clients in their business-to-business (b2b) collection needs. We take pride in obtaining payment on accounts receivables without fracturing critical business relationships or engaging in time-consuming and costly litigation efforts.
If you need business debt collection services conducted in a professional manner, contact our B2B (business-to-business) debt collection law firm by calling 312.454.2859 or visiting www.jayaramlaw.com.