What is credit management? Tips for entrepreneurs

What is credit management?

Credit management means managing your debtors. You can define it as all the activities of your company that ensure customers pay your invoices. Accounts receivable management starts even before you enter into an agreement with your customer and ends when the invoice is paid.

With good credit management, you prevent yourself from getting into financial trouble. Whether you do it yourself, have a team ready for this or outsource it: it is very important to pay sufficient attention to preventing and monitoring outstanding invoices.

Why is credit management so important?

Credit management not only ensures that overdue invoices are paid, it also protects your cash flow. With a good accounts receivable process, you prevent invoices from being paid late and ensure that no abuses occur around invoices.

Lax credit management can leave your company waiting for your invoices to be paid. Studies show that 25% of business failures are related to late payment or non-payment by customers.

Yet too conservative credit management can stifle the growth of an otherwise healthy customer relationship. If customers cannot get the credit they need, they may take their business elsewhere.

Only 58%

of business invoices are paid on time

(Free Agent)

What does a 'good' accounts receivable manager do?

A debtor manager is responsible for the entire process around managing debtors, from preparing invoices to sending reminders or transferring receivables to a collection agency. Good administration is very important for a company. This is because it can prevent customers from not paying their invoices or not paying them on time.

Good credit management therefore boils down to the following: 'Ensuring that customers pay your invoices as soon as possible and in full'.

Tips for successful credit management

Many business owners tend to give their customers plenty of leeway. Has the payment deadline passed and the money hasn't arrived yet? Then they'll wait another week or so. That's the worst thing you can do. Outstanding invoices can lead to a serious liquidity problem. Therefore, give debtor management an important place in your daily business.

We give 3 important tips in advance:

Make sure you have good and clear general and delivery terms and conditions. And always send these along when you confirm the order.
Check whether you have included retention of title in your terms and conditions. Retention of title means that your customer only becomes the owner of the products delivered by you when the invoice is paid in full. Does your customer not pay? Then you can use the retention of title clause to claim your product back.
Before doing business with a new customer, check the customer's creditworthiness, payment history and financial status. And check whether your contact person is authorized to sign.

Get many more tips!

Do you want to know more about how to improve your credit management? Discover our whitepaper about bankruptcies and defaulters full of useful advice and practical tips.

Fill up the form below
to download the whitepaper.

Choose more security in your credit management

You'd rather be busy doing business. We understand that like no other. With our credit insurance we provide more security in your credit management. Then you no longer have any doubts about whether you should take on that big order. And you won't lie awake wondering whether a large invoice will be paid. Credit insurance provides payment security. A lot of misery is prevented and you can concentrate on your own business. Credit insurance is no guarantee that customers will always pay your invoices, but if it does go wrong we will compensate you for the damage.

Want to know how credit insurance can help your business? Contact us or read more about our solutions.

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