Credit and collections is a process most companies have to deal with regularly. What you want out of it is to turn invoices into cash while adhering to the terms of payment. This is however not an easy task. For most companies, to achieve a smaller accounts receivable and increased cash flow, the points of gain must be smaller and incremental, but with an overall consequence of achieving this stated objective.
In order to mitigate the hassle, the best way to do this is to compartmentalise the problem and turn it into smaller points of return on your way to combat the issue in its broader scope. The following are the smaller building blocks that will build your monumental success in attaining your credit and collections goals.
Facilitating invoice payment
It is imperative that you send invoices promptly for a customer to receive it, have it approved for payment and as a result, pay you on time. You should help move this process along since they may have to go through several steps as well before settling it. An excellent way to do this is to establish a credit and collections management system with invoices tailored to the preferred format of the customers.
Ameliorate management of accounts receivable
This is an uphill task where the inherent goal is twofold; to complete past sales as well as stimulate repeat sales. Returning customers have a value that cannot be understated, being inexpensive and probably a constant income source. Therefore, utmost care must be taken to apply nothing but the best practices to make sure you get your money back but also maintain a healthy relationship with returning customers as well as foster the growth of others.
Grasping the process of credit/sales approval
The aim of this procedure is to maximise your opportunities for sales while making sure that you employ a tactful approach to credit risk-taking. Case in point, your accounts receivable is unlikely to improve if you are making sales with bad customers. Irrespective of the number of customers you may have you will barely collect any cash. You can make sure your sales team and credit managers are on the same page, and this will be the first step to a durable and effective credit/sales approval process. Acquainting both teams with the policy and procedures in the other’s department will go a long way in its mastery.
Frequently monitoring performance
Analysing your current standing in relation to your desired result is a must-do. Setting in place credit goals and then tracking your progress is a crucial part of your strategy for reaching that broader objective. This is to identify shortcomings and strengths and adjust accordingly. You can use common metrics that will aid in this evaluation process.
Maximising these small incremental areas will fix the greater problem, while bringing cause for celebration of small achievements, making for an effective and satisfying credit and collections process.