Is an Ineffective Credit Policy Risking Your Cash Flow?
Are you putting your cash flow at risk by having an ineffective or badly enforced Credit Policy? There are many simple steps you can take to improve your credit policies, yet a new survey shows that 32% of businesses are putting themselves at risk of bad debts and uncertainty by failing to confirm their credit terms in writing.
The poll, by the Better Payment Practice Group (BPPG) found that although small businesses were the most careful; there are still well over a million SMEs failing to confirm terms in writing.René de Sousa, BPPG representative for the Chartered Institute of Purchasing and Supply, said: “By not agreeing terms up front, businesses are putting their cash flow at risk of abuse from late payers. The BPPG recommends that businesses send written confirmation of credit terms to customers before they start trading with them, to avoid disputes further down the line.
“As well as ensuring that customers know when to pay, agreeing terms of trade credit at the outset provides an important opportunity to inform the purchaser of any legal redress that may apply in the event of late payment – such as the statutory right to claim interest and compensation for debt recovery costs under the late payment legislation. Businesses of all sizes need to recognise that agreeing credit terms is as important a part of the contract negotiation process as price, service and delivery.”
Confirming credit terms is a simple step that has virtually no cost and takes little time (especially if over email or the internet); considering the potential damage that can be caused by not doing it, it is odd that any business would not confirm credit terms.
Our free BizStart24 software includes a credit application form and a two different terms and conditions forms; this can help you improve your credit policy for no cost! Remember we also have a wide range of articles designed to help you with your credit policy, credit management and debt collection.
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