Determine to whom you are going to extend credit (i.e. anyone, new customers, etc.).
Decide a suitable credit limit. This could vary depending on the customer.
Ensure all staff members are aware of the credit policy and are aware that it MUST be enforced.
Decide upon the terms? I.e. 30 days? 60 days? Pay upon receipt?
Decide upon penalties to be imposed if an account becomes past due.
What actions are you going to take when there is non-payment?
In rural areas, recovering outstanding debt becomes another challenge for the striving business owner.
As you strive to build your customer base, it is suggested that another employee who is not a customer service representative takes on the daunting task of collections. This delegation will enable the owner to maintain strong relations with the customer while still enforcing the recovery of the debt. In most cases this is where a collection professional or third party agency is required. The collection expert may opt to use the “Soft Touch” approach to recover an account while keeping a positive relationship between the client and debtor. This non-aggressive method gently encourages the debtor to reveal the reasons for the overdue account. On most occasions it requires the debtor to confide their financial situation to the collection professional and together devise a payment plan suitable for both parties.
Information Wanted When Extending Credit
Request a credit check on your customer.
Ask for more than a post office box. Post office boxes can be changed or closed so ask for a civic or street address.
Ask for a customer’s date of birth and/or social security number. This will help you to trace them in the future.
Hold two people responsible for the debt by asking for both spouses’ names, for example.
Inquire about their employment history. How are they going to pay you if they are under/unemployed?
Remember: The customer who has a problem with getting their credit checked is the customer that you DO NOT want.
Every business must develop and maintain a strong credit policy. Each time a customer leaves a business with goods or services, that business takes on the role of a bank.
Before Submitting an Overdue Account to a Third Party
Determine if the debt is collectable. As the debt ages, the chance of recovering the debt will decrease dramatically.
Attempt to contact the debtor by phone and set a deadline for payment.
Send a final notice informing the debtor that you have been forced to forward the account to a third party and/or to take legal action.
This post and similar advice can be found in the book 20 Tricks, Tips & Techniques: on Successful Debt Collection and can be purchased here.