Trade Credit: How to get paid what you are owed
As a business, if you’re extending credit to your customers, then you’re operating based on the trust that they’ll pay you in due course. Unfortunately, some companies won’t be able to meet their duties and will default on their payments.
The success of your business relies on you eliminating as many of these potential defaulting clients as possible. Here are some of the ways you can actively work on to improve your credit lending.
Have robust terms of trade
Your terms of trade outline your policies around payments. This includes prepayment, down payments, discounts for early settlement, payment frequency and timing, actions to be taken in the event of a default, etc. You need to review your terms of trade frequently to ensure they meet your requirements.
“We come across companies which have no terms of trade signed; a total no-no if you are offering credit terms,” explains David See, GM of ICMS CreditSystems and Waterstone Recovery. “The worst is when there is a signed terms of trade, but the company has lost it and it cannot be found.” Don’t make this mistake – get your terms of trade sorted.
Conduct a credit check
It may seem self-explanatory to conduct a credit check before you lend stock out to a client on trade credit. However, many companies find the process so cumbersome that they choose to omit it altogether. Instead, use a tool like 1Centre that allows you to conduct credit checks automatically, from any computer in the world, based on the cloud.
With 1Centre, credit checks will be fast, effective, and hassle-free, and they’ll give you all the insights you need to make an informed decision about working with a particular customer.
Get all your staff involved. Enable your staff to become invested in the company’s success by giving them access to, updates on, and the chance to influence accounts receivables. If staff understand the importance of this aspect of your business, it helps them to be active in chasing payments and pushing for disputes to be rectified.