Not my words, but those of Clive Lewis, Head of SME issues at the Institute of Chartered Accountants in England and Wales (ICAEW).
“Nobody can hide from the difficult credit situation any longer. Critical to coping with it is rigorous credit control – and that means having up-to-date credit references,” says Clive Lewis.
“Whilst many small businesses are diligent in carrying out credit checks on new clients, the information obtained is only of any use if it is up-to-date. In the current credit crunch climate, customers’ creditworthiness can change rapidly, so it has never been more important to ensure data on your customers is valid.”
Lewis concluded: “Credit information is available online at the touch of a button, so there is no excuse for not being bang up-to-date. Avoiding a bad debt can more than justify the cost.”
I agree with Lewis 100%. However, what I can’t understand is why for the six months we had a free credit rating service available in the Business & IP Centre, only a handful of our customers made use of it.
Top tips from ICAEW
Get regular up-to-date credit information on major customers and periodic updates on smaller accounts
The credit limit (as suggested by the credit check) shows the
maximum amount which may be owed by your customer at any one time –
make sure your sales don’t exceed this limit; and ensure you have in
place robust internal procedures for dealing with customers who exceed
Assess your payment terms – make sure you have agreed when you
will receive payments and remind your customers about the payment
Don’t be afraid to chase your customer for payment – waiting
politely will not help protect your business and your shareholders
- Remember: a sale is not a sale until you have received payments!