Business solutions experts reveal that over 10,000 businesses fail every year because of late payments. It is for this reason that the Better Payment Practice Group has embarked on a campaign, the goal of which is to advise businesses to be more alert in noticing signs of a credit management policy thatâ€™s about to fail so as not to meet failure with the company they have failed and ultimately throw away the efforts that were exerted in forming the company.
Here are some signs/warning signals that would mean the credit management policy of a business is in dire need of improvement:
â€¢ If a business oftentimes reaches or exceeds a bankâ€™s limit for credit facilities, the best option is to review the companyâ€™s asset management policies and credit management
â€¢ If debtors always pay invoices outside the credit period agreed upon then the collection methods must be reviewed and improved.
â€¢ Good payers that slack off in payments may mean that the businessâ€™ collection system is also being ineffective look into this and improve as necessity dictates.
â€¢ Excuses that affect work may be a sign that the customer may have discovered the laxity of the credit system. Fix the system as needed.
â€¢ If the supplier suddenly discontinues its bills payment a point will be reached where the business will exceed the credit limit and supplies are stopped.
â€¢ The companyâ€™s credit insurance or the formulation of an effective internal system to assess credit risk can be a helpful way of protecting a company. This is particularly effective especially there is a heavy reliance on another business or has a collection of customers who have vulnerabilities with regards to cash flow.