Netpreneur

In times of rising interest rates and reduced consumer spending, it's important to have a clear, unequivocal credit policy when dealing with clients.  If they don't pay in full and on time, then your business will suffer.  In small business, cash flow is king.

There are a number of things that you can do to ensure that you get paid on time:

1. Have a credit policy and communicate your terms and conditions when you transact with clients - if necessary, have your new client sign a written set of terms and conditions, as well as displaying your terms prominently on your invoices.

2. Run a credit check on all new clients - there are numerous credit check agencies that can determine whether your prospective new client is a bad payer.

3. Keep abreast of your clients' business health - keep your ear close to the ground so that you can find out early if your client is in financial trouble.

4. Follow up invoices - you should follow up your invoices a certain number of days after issue.  Your follow-up procedure should be documented in your credit policy and it should be executed to the letter without exception.

5. Keep good records - without good records, you could find yourself in dispute with a client over an unpaid bill.

6. If you have lots of invoices, consider outsourcing your accounts receivable function - known as 'factoring'.

ACTION LIST

- Write a credit policy for your business

- Ensure that your policy is articulated to clients via invoices and agreed in written terms and conditions

Tags: finance