Thursday, October 3, 2013
Sometimes it pays to read the manual...
When you’re in business, you may feel that a competitor always lurks on the horizon, plotting and scheming to take away your customers, cut into your market share, and take your profits. And you’re right. Competition is a fact of life, and with it comes the pressure to extend credit to all the customers who come your way, whether they deserve it or not. After all, if you don’t give customers credit, they can probably find a competing business that will.
If you’re relatively new to the credit and collections process, you may be asking yourself several questions:
* Should I always be willing to open a line of credit for a customer?
* How do I balance the risks of extending credit against the risk of losing the business of customers I turn down?
* What happens if a client doesn’t pay an invoice?
* How can I deal with issues such as any bad checks or disputed claims with a customer I’ve done business with?
* What do I do if a customer suddenly moves, leaving no address or phone number to make contact?
* Can I file a lawsuit, and how do I sue?
* When do I need a collections professional to help me, and how do I find one?
The book Credit and Collections Kit for Dummies addresses those questions, both in short form in Chapter 1 and in detailed form in the remaining chapters of this book. As for Dummies book readers know, each chapter of a Dummies book provides a stand-alone guide to a particular topic, so you can peruse the topics that most interest you and come back for all the rest at your leisure.
As an example of the types of practical tips offered in the book:
You can avoid a lot of difficulties with defaults in payments from customers if you monitor your clients for changes in their business and financial health. For example, if you find out that a customer’s business has new ownership, or that the owners have formed a new but similar company (John’s Bike Shop is now John and Mary’s Bike Shop), it may be time to thoroughly recheck that customer. Sometimes your clients really don’t want you to find out about changes, and that’s a reason in and of itself to recheck them.
If a customer won’t take the time to fill out a credit application, and you choose (or need) to extend credit to the customer anyway, you can protect yourself. Make sure you interview that customer to obtain the information you need to determine creditworthiness and to use as a resource if the customer’s paying habits deteriorate. If you interview the customer by phone, keep a recording of the call (but be sure you can legally record the call under the laws of your state), or write the answers down on your standard credit application and add the completed document to the client’s credit file.