A successful company usually stands or falls with the way it approaches its credit management. Correct follow-up from quotation to payment is indispensable to make new investments in a thriving company and to maintain a healthy cash flow. But credit management, what is it? And how do you get started?
Prevention is better than the cure
Literally credit management means managing your credit. In other words, it contains all the steps you take to ensure that your outstanding invoices are paid (on time). You quickly think of setting up payment reminders, making phone calls and sending emails and, if you haven’t received any payment, sending a notice of default or engaging a third party.
Good credit management actually starts much earlier. Already at the first customer contact. The quality of this first contact has a lot of influence on the speed at which an invoice will eventually be paid. In addition, it doesn’t only help you receive your money (on time) and prevent cash flow problems, it also ensures that you strengthen your customer relationship and reputation.
8 steps for a good credit management
Credit management is certainly not a ‘one size fits all’ story. In one sector they often work with a prepayment, in the other they work with partial payment throughout the project. This doesn’t not detract from the fact that there are certain default steps that you can follow to set up a good credit management for your business.
- Schedule it as a regular task
Drawing up and following up invoices takes time. So, schedule it as a fixed weekly task and deal with it accordingly. This way you avoid losing sight of payment terms and you can send a reminder in time of the payment is not made.
- Know your customer
Get to know your customer from the first contact. How did he end up with you? This also contains valuable information to optimize your external marketing. Google your new customer. Is it easy to find? Especially in times of corona, reducing the risk of defaulters or possible bankruptcy is important. Are you in doubt? Consult the annual balance sheet on the website of the National Bank.
- Make clear agreements
Before you deliver the goods or services, it is always recommended to make clear agreements and put them on paper. Here you state all specific information regarding the delivery such as description; total costs, delivery time and payment term. But you also add the name and position of your contact person and the details of your company and those from your customer. Finally, you can add additional terms and conditions and refer to your general terms and conditions.
- Invoice immediately after delivery
It is advisable to prepare and send your invoice as soon as possible after delivery of the goods or services. The later you send your invoice, the longer you have to wait for your money. Be sure to state all necessary information, such as description, amounts, account number and payment term. But don’t forget to add a payment communication, so you can easily check payments.
- Send a first reminder
Have you not received a payment after the payment term has expired? Then send a short and friendly first reminder. It may be a forgetfulness of your customer. Ask to pay within seven days. Refer to the invoice number and state the outstanding amount and the due date of your invoice. Our tip: do not number your payment reminders, otherwise your customer may think that there are more to come before you’ll take further steps.
- Time for a second reminder
Still no payment after seven days? Contact your customer by phone to find out why the payment wasn’t made. With a personal contact you can often count on sympathy from your customer. So be sure to keep an understanding tone of voice.
- Default per email and post
Still no payment? Now your tone can be a bit firmer, but still respectful. You must of course get paid for the goods or services you provided. State the costs charged and the consequences that will follow if payment is not made.
- Assistance from a third party
If you still haven’t received any payment, you can ask assistance from a third party. There are many financial parties who can help you. Find the right partner who has the same values as you. Go Solid helps entrepreneurs to collect their undisputed unpaid B2B invoices in an honest and cost-efficient way.
It is important to follow the steps in your credit management carefully and consistently. The longer your invoices are left unpaid, the less likely that they will be paid and the less money you have to pay suppliers or staff. But it can also cause you to lose your credibility as an entrepreneur. If you do not follow up your outstanding invoices correctly, why would your customer pay his invoices correctly?
Would you like to know more about optimizing your credit management? Download our free e-book packed with tips to collect and prevent unpaid invoices.