Getting customers to pay their bills can sometimes be quite a job. Changes to contact details, ignored messages, cash flow problems – all of these (and many more) reasons that customers give for not paying off or not being able to pay their bills mean that credit management teams have truly got their work cut out when it comes to collecting payments and maintaining cash flow.
All organisations, no matter how big or small, have to deal with customers that pay late or not at all. From large multinationals to the SME sector and sole traders: no business is immune to late- or non-payers. What can you do about it? You can decide to keep sending invoices and reminders, but you can also take proactive measures to ensure that your customers know what you expect of them. But how? By formulating a credit management policy clearly setting out your requirements and procedures.
The difference between SME and large companies
It’s easy to think that a company is too small to warrant having a credit management policy. Perhaps you only send a few invoices a month, or have a low turnover and a small team. But the difference between small and larger companies isn’t really that big. Categorising organisations by the number of employees or turnover is less relevant than it used to be. Companies with no more than a handful of employees but with customers all over the world are blurring the lines between the SME sector and large companies.
Rather than considering the size of a company, we should look at the various positions held in it. If you devote a whole team to chasing up late payments, a policy will certainly add something. But it’s also perfectly possible that there’s just one person responsible for dealing with late payments at your company. That person spends a couple of days a month on credit management, and that’s quite enough as things stand. But what if your company grows? The requirements change as your company gets bigger and a credit management policy is a welcome addition.
Why a credit management policy is always important
Having a credit management policy does away with surprises. There are no surprises for the sales team when they attract a new customer or start negotiations with a customer. There are no surprises for the credit management team when it comes to dealing with late payers. And there are no surprises for customers who miss their payment deadlines. But there are more benefits:
- Time savings
Making decisions on a case-by-case basis takes up a lot of time, and that’s precisely what happens if you do not have a policy. A fixed policy means that all credit managers know precisely what to do.
- Tightening up KPIs
KPIs can help you to identify problem areas. By streamlining the credit management process you create an overview and efficiency.
- Professionalism and uniformity
Without a policy it’s likely that everyone in your team tackles tasks in a different way. This may result in customers being treated differently. To maintain a degree of consistency in your team it is advisable to operate the same rules and guidelines for everyone. A policy also helps to ensure that all members of the team treat customers in the same way. If a teammate is sick or on holiday, it is an easy matter for someone else to take over the tasks and answer the customer’s questions.
- Cash flow improvements
Cash flow is of vital importance to a company. Money comes from paid invoices, so that you in turn can pay your employees and suppliers. You also use it to invest in improving your products or services. If the money fails to arrive on time, you could face serious difficulties. The policy creates a clear overview.
Even your company is big enough for a credit management policy
Ultimately, no company is too small to formulate a credit management policy. All companies should have a policy to ensure that outstanding payments are treated fairly, consistently and effectively.
Learn more about the basics of a well-structured credit management:
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“If you are not taking care of your customer, your competitor will.”
MARTIN DE HEUS