A tighter credit collection policy and control system can help any business by identifying potential debts and taking necessary steps to reduce them, and get paid on time, according to Mark Hegarty. In his article, Hegarty provided some tips to ensure prompt payment, summarized below:
1) Set up a cash management system to decide which customers will receive credit. As credit is not an automatic entitlement, it’s better to credit-check potential new customers and set a credit limit for each customer .
2) Use fully documented terms of service which specify credit terms. There are also instances when a deposit or payment is necessary. Most important, have procedures to deal when disputes arise and make sure that transaction is properly documented.
3) Billing procedures must be in place. These include sending invoices which can be done via email and following up on these invoices. Set an automatic reminder procedure to flag invoices that are due. Chase up payment by phone.
4) Set a collection policy where overdue payments must be chased within a week of being due and prioritizing collection activities to chase customers with highest unpaid account first. Use a set policy for further chasing customers, such as referring them to a debt collection agency.