Friend or Foe?

It is often difficult for a small business owner to play the role of the friendly sales

agent, as well as the adamant credit manager while maintaining a relationship the

customer. Unfortunately, when extending credit there is no definite way to guarantee

payment. With a proper credit policy in place, this should decrease receivables and

make it less likely for the business owner to turn into the enemy when faced with

collecting the overdue account.

Many business owners, especially new business owners, are so eager for a sale

that they neglect signing documents or discussing payment. The business does not

want to offend the new customer by asking for a method of payment. They fear that if it

is difficult for a customer to obtain credit, they will take their business elsewhere. Lack of

proper credit policy is the main reason that businesses have overdue accounts. Small

businesses are infamously guilty of having a weak or non-existent collection policy.

Some businesses have a policy but use it inconsistently, which yields less than

favourable results. As one of the keys to success of any business, receivables management must be taken into consideration when venturing out as an entrepreneur. Unfortunately this key element is often overlooked as the entrepreneur’s attention is pulled in different directions.

If you obtain as much information as possible from the customer when extending this

credit recovery of the account is more likely if it becomes past due. In order to

successfully manage debt, it is customary to ask potential customers for credit

references. In smaller communities it is suggested that you network with fellow

companies to, creating a mutual exchange of information. Most companies are

quite willing to share information on past delinquents to help you to learn from their

mistakes.