Common Credit Control Policy Mistakes to Avoid
Many businesses work under the assumption that their customers will act in good faith and pay their invoices as soon as they’re received. Unfortunately, studies show that up to one-third of businesses pay their bills late . While some of the responsibility falls on the customer, your business may be making the following correctable mistakes that are affecting your ability to invoice and collect payments.
Using the Same Strategy for All Customers
Every business has its own payment procedures, policies and idiosyncrasies. When you start doing business with a new customer:
Set clear payment terms and take the time to understand how their procedures align with your expectations.
Make sure you have a signed written agreement that clarifies all expectations. This makes it harder for a customer to use confusion or misunderstanding as an excuse for non-payment.
Learn if any specific information needs to be included or procedures followed when invoicing.
Know whom to contact to address late-payments or other concerns.
If you want to receive payments quickly, you need to invoice quickly. Ideally, invoices should arrive immediately after delivery when a customer is most receptive to paying. Ensuring that invoices are complete and directed to the correct parties will also make your invoice harder to ignore.
Passive/Antagonistic Payment Management
Managing late payments from customers can be a balancing act. If you’re too passive and give customers a pass, you’re losing revenue, setting a bad precedent and encouraging them to ignore you. At the same time, charging late fees and interest, disrupting deliveries, sending out debt collectors or threatening legal action can turn customers off and cost you their business.
When collecting payments, be assertive but polite. Be ready to pick up the phone and include your sales team and account managers in the process. When they do pay, always send the customer a thank you to acknowledge receipt and maintain a good relationship.
Euler Hermes: A Trusted Partner In Customer Credit Management
Even a well-defined strategy can’t cover all risks. Credit insurance can help. Euler Hermes provides your company access to the most accurate information on customers, prospects, industries and countries. Our team of experts provides active monitoring on all accounts, a structure and discipline for credit decision making, resources for collections and payment when your insured customers fail to pay. Credit insurance takes the guesswork out of your company’s credit process, giving you the confidence to safely grow your business at home or abroad.
Learn more about trade credit insurance from Euler Hermes to supplement your customer credit management process.