Leveraging Credit To Your Advantage Through a Good Credit Policy

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Credit has been one of the most effective ways to attract more customers to a retail business. The appeal of buy now, pay later enables customers motivates them to purchase while increasing their buying power significantly. Merchants also benefit from ensuring a captive audience; customers can make big purchases immediately rather than waiting, which could increase the likelihood of them taking their business elsewhere.

However, credit comes with risks. Because no cash is received, businesses take in a temporary loss every time they sell with credit. This can become really problematic when customers fail to pay on time. The tempting allure of credit sometimes often snags truly irresponsible buyers who end up purchasing beyond their means.

Because late-paying or nonpaying customers can interfere with cash flow, it is important that businesses work toward a credit policy that opens up the customer's buying power without extending credit to every customer that asks.

Here are a few ways to make credit policies work for a business, maximizing its benefits while reducing its risks.

1.Offer cash discounts. Cash flow is one of the most significant ways of supporting a credit policy. Simply offering lower prices for cash payments can inspire more customers to pay with cash.

2.Keep ample documentation of billing. Sufficient records can make each of the credit lines extended to customers easily tracked, ensuring that late payers can be properly identified, and payment disputes immediately resolved.

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3.Have strict requirements and terms for extending credit. Properly set requirements and clearly laid out terms can ensure that credit lines are extended to customers deemed eligible. The additional requirements involved can even discourage more impulsive buyers from buying on credit willy-nilly.

Businesses can also set up a collections policy to deal with late-paying and nonpaying clients.

Brennan & Clark provides businesses with an array of customized solutions for receivables to make quick work of payment collections. Visit this blog for more updates on collecting from customers.

Handling Chronically Delinquent Clients: Tips For Small Business Owners

Unlike most clients that are sometimes late in payments for legitimate reasons, chronically delinquent clients habitually pay late, pay rarely, or in some cases, never pay at all.

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Serial late-payers are the bane of businesses of every size. Delinquent accounts, however, are a particularly serious problem for small businesses. Having enough habitually delinquent customers compromises a small business' cash flow. To make matters more difficult, small businesses rarely have the tools and expertise needed for collecting on delinquent debtors.

The following are some tips for small businesses dealing habitually late-paying customers.

Have a process in place

No matter how small a business is, it must develop and follow a clearly defined set of policies for late-paying customers. These procedures must include details such as payment deadlines, late fees, and frequency of payment reminders.

Note that there shouldn't be a one-size-fits-all approach to all late-paying customers. A customer who regularly pays on time but forgot to drop a check in the mail for the last bill is dealt with differently than a customer who has never paid on time.

Communicate well and often

Businesses must invoice their clients on time, and clients with a history of late payments must be contacted on the date the payment becomes overdue, preferably over the phone or face-to-face instead of through email or regular mail.

Business owners should calmly yet clearly inform a late-paying customer about the overdue bill, ask for his reasons for paying late, and ask him to commit to paying the amount owed at a date both parties agree upon.

Consider hiring a collections agency

If a client refuses to pay or ignores all attempts at communication and negotiation, and his or her account is past due by more than the acceptable amount of time, business should consider hiring a collections agency. Taking a client to a small claims court can be time-consuming and costly, whereas collections agencies take care of the legwork when it comes to chasing after late-paying customers.Collections agencies allow businesses to get on with more pressing matters while recovering delinquent debts.

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Collections agencies are typically paid either a percentage of the debt recovered or a standard amount of commission for certain types of debt. Others charge monthly rates, while others offer the same services for a flat fee.

Brennan and Clark offers customized account receivables support solutions that eliminate credit losses. To learn more, like this Facebook page.

Surviving Interruptions In Cash Flow

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Among the most important aspects of running a business is cash flow. Often, businesses rely heavily on cash flow to fund their operations. Any interruption in cash flow can gradually imperil a business' ability to stay afloat to cover costs.

Some events can cause a partial or general interruption of income, and being prepared for these developments and responding appropriately can help businesses resume the flow of revenue.

In some cases, such as natural disasters, income interruption is caused by the full incapacitation of a business' operations. Having the necessary preparations for the disaster can help businesses resume normalcy in operations and thus, restore cash flow in the shortest available time. Business owners should also maintain a close relationship with a bank to open up lines of credit. This would help cover most expenses while the business gets back on its feet.

Outside of disasters, the most common of all sources of cash flow interruptions is a poor credit policy. While it is unrealistic to expect all customers to pay on time every time, it is a sign of poor policy for credit to be extended to customers with questionable credit ratings. A poor understanding of the paperwork involved may also impede the business' ability to deliver invoices and track customer payments.

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Businesses should have a clear understanding of the process of invoicing and have a strategy in place to efficiently deal with late-paying or non-paying customers to prevent problems such as these from growing out of proportion.

Drawing from more than three decades of industry experience, Brennan & Clark assists businesses in enhancing their existing collections strategies in a way that suits their needs. For more on the importance of maintaining cash flow, visit this Facebook page.

The Pros And Cons Of Extending Credit Terms

Credit terms can significantly affect the cash flow of businesses. Hence, it is a must for both big and small businesses to have established credit terms. One of the most common dilemmas concerning credit terms is whether they should be extended. Here are some benefits and drawbacks of extending credit to clients: 

Pros:

More loyal clients- A business that extends credit gives clients the impression that the company trusts them. Also, clients will most likely appreciate the convenience that extended credit offers because it helps them to be flexible with their finances. 

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Competitive advantage- Other businesses in the market may not be offering extended credit to clients, so companies that do otherwise gain an edge over those competitors.

Increase in sales- Studies show that most customers tend to be more willing to pay more with the knowledge that they can pay later. This results in businesses gaining more clients and gaining sales, assuming that they pay.

Cons:

Unreliable clients- Extending credit may gain loyal clients, but it can gain unreliable ones as well. Businesses will often come across clients who pay extremely late or those who do not pay at all. 

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Cash flow problems- Strict credit policy results to steady cash flow while extended credit terms may disrupt the resilience of cash flow because of unreliable clients.

Insufficient income- Cash flow problems, if not handled efficiently, will most likely result in insufficient revenue. This may force the business to borrow money to sustain operations. 

Brennan and Clark has been providing businesses with quality debt recovery services since 1980. For updates about credit collection, follow this Twitter account.

Business collection agencies: Choosing the right one

On occasion, hiring a business collection agency is a necessity. This is mainly because business owners have a bulk of responsibilities, and handling delinquent accounts can be physically, emotionally, and mentally draining. However, while many business collection agencies deliver, they are not managed and ran equally. That is why it is important to be meticulous in choosing from which agency to seek assistance. Below are some points to consider when choosing the best business collection agency:

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1. Research

Business collection agencies usually have specific fields of expertise. For instance, some agencies deliver remarkable results from large businesses, while others excel in small business or home-based enterprises. Knowing the type of agency and their most common business dealings can be utilized to the business owner’s advantage.

2. Asking about “skip tracing”

Owners of delinquent accounts could skip town, making it much harder for businesses to collect their dues. In order to prevent this, good collection agencies use what is known as “skip tracing.” By accessing several databases, they can track down debtors who have not left any forwarding address.

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3. Agency insurance

Despite all the research findings, there will be times the collection agency will act aggressively, making the debtor feel that the collector acted in bad faith. In this instance, the debtor can sue. Acquiring proof of insurance will ensure the business owner will not be held liable for hiring the agency.

Brennan & Clark is a business collection agency that has been operating since 1980. A member of the Commercial Collection Agency of the Commercial Law League, the firm offers unparalleled service and the most comprehensive guarantee in the industry. Know more about the company here.

Small Business Money Matters: Understanding and Optimizing Cash Flow

Cash flow plays a vital role in the survival of any business through all the stages of its life cycle. Nowhere is this more important during the buildup phase, where business owners must pay off debt obligations, pay employees, and stretch out the initial funds until the enterprise can get on its feet. Companies that fail to manage cash flow adequately within the first year of operations almost certainly fail to survive the following year.

As the business expands, the revenue accumulated would pay not only for the operational expenses but also serve as a gauge to determine potentials for growth. Frequent interruptions in cash flow can stymie development and may in extreme cases cause a business to grind to a halt.

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Cash flow management begins with finding the break-even floor, the point where revenues match expenses. Efforts must be made to break even, which may seem initially counterintuitive for those oriented toward profit, but would actually free business owners to pursue profit once all expenses have been covered. Payment capacity, in turn, should be based on actual revenues on hand rather than short-term profit projections.

Ensuring cash flow may also entail actively reducing and managing expenses. While some expenses can be eliminated from the onset (something lean startup advocates prioritize), others must be selected over others. Paying for everything all at once is a recipe for long-term disaster; whenever possible, businesses should get longer payment terms on loans and credit to reduce their initial monthly cost.

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Finally, business owners should make efforts to boost the amount of payments coming in. For sales-based businesses, this involves creative incentives to motivate employees to close more deals. Commission-based business-to-business enterprises should have in place a system to deal with the occasional late payments. Finally, businesses that offer in-store credit should have stricter requirements for any credit applicants.

Having behind it more than 30 years of experience in the revenue collections industry, Brennan and Clark works closely with clients to create programs that enhance their existing collections strategies. Visit this Facebook page for more on the company and its services.

Navigating Through the Process of Payment Collections

Payment collection is the awkward elephant in the living room that every business must eventually master.  Payments made on time are the lifeblood of the company, guaranteeing a steady stream of cash flow to cover operational expenses and invest in growth without squandering credit lines.

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Because making payments on time are an important matter, it is vital that businesses have the necessary information and documentation in place to assist in the process of collecting payments.  Documents like contracts and credit policies, for instance, can go a long way in reminding customers of the terms of the credit arrangement and schemes of payment.   Stricter protocol on credit should also be put in place to reduce the likelihood of extending credit to clients incapable of paying on time.


Though it may be awkward for everyone concerned, making a collection call or following up payments remain at the forefront of ensuring that payments are made.  It immediately provides feedback and allows for some degree of flexibility to reach a compromise when the situations demand it.


Finally, businesses should not hesitate to call in the services of a collection agency should the customer prove rather difficult to collect from.  Far too long a delay may make further attempts at collection difficult.   Having a competent collection service on call can prevent further losses to delayed and missing payments down the line. 

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Brennan and Clark goes beyond collections in providing clients with the needed assistance to secure cash flow and eliminate credit losses.  For more on the company and its services, visit this Linkedin page.