Ten common mistakes when tackling business debtors – Mistake 1: Failing to have a credit policy
11 January 2016
Mistake 1: Failing to have a credit policy
When a company provides goods or services before receiving payment, it is essentially the same as handing over cash. For this reason it is vital for cash flow and ultimately the survival of your businesses to be able to predict when you are likely to get paid and the cost of ensuring that this happens. This begins with having a credit policy.
By gathering the same types of information from each customer, it is possible to attribute different risk levels to each and adjust your payment terms accordingly. Your credit policy provides uniformity of terms for each type of customer you have and ensures compliance with regulations. Without a credit policy you are at risk not only of losing money, but also of breaching consumer protection regulations. If you treat some consumers more favourably than others without proper rationale, you could even fall foul of discrimination legislation.
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