Credit management is the plan your business has for collecting outstanding money that you’re owed.
It’s basically how you get payment from your customers when your customers have failed to pay their invoices.
As much as you’d like to believe that all of your customers will pay their bills on time every time. This just isn’t the case.
If you don’t have a credit management policy you may end up losing out on payments you’re owed.
It’s important to have a black and white policy that applies to all customers when it comes to collecting money.
Each type of business will have a different credit management plan.
For some, they’ll ask that customers pay at least 50% of their bill upfront before services are rendered. For others, full payment will be required before work has begun or product is shipped. Other businesses will provide payment plans to their customers over time.
It all depends on your business model and the needed cash flow that your business needs in order to keep the doors open.
Regardless of what type of credit management policy you have, it’s important to have one in place before your business sends out its first invoice.
Want step-by-step instructions on setting up your own credit management policy? Read our blog 5-Steps To Develop A Credit Management Policy.