As a small business owner, you have many things to remember and to worry about. You have to pay employees, buy an inventory, pay your rent, and remit the taxes. Being able to manage properly your cash flow is critical in ensuring that you can meet needed financial obligations. It is important that your customers pay on time, because if they don’t pay, or never pay at all, it can drive your business into a very difficult position and even can influence in business closure.
However, there is a way to decrease the chances of your clientele not paying by inspecting their credit and working out clear payment terms.
Create credit rules and policies for your business that outlines:
- Criteria for allowing customer credit
- Decide on how much credit you can give
- Establish what your payment conditions are (billing cycle, payment due date, deposit/retainer requirements, interest charges, etc.)
After establishing all those things you have to think about creating a credit application form for your clients. The form can be used for many internal purposes, for example: mailing invoices, following up about payment matters, ordering a credit report from a credit bureau. Majority of the credit bureaus provide subscription services in case you are planning on doing a lot of credit reports for you business. Make sure to read carefully the information that is required by the credit bureau to be able to do the needed research about the individual or the organization you are requiring about. This process should be finalized before the credit application form to ensure you are gathering all of the necessary information.
Creating clear credit rules and policies and gathering the credit bureau reports can help you supervise the credit-giving process. However, at the end it is only you who can determine whether to give the credit and to do the businesses.