First step in preventing overdue accounts is to analyze the potential customer's credit report before you extend them credit. The reports show historical payment data and a rating that demonstrates how likely they are to pay their bills. While you don't want to destroy any future or existing business relationships by laying down strict payment terms, you must enforce these terms to avoid future cash flow problems. Closely monitor new customers with less than perfect credit history. The credit rules of the company must be laid down early and firmly from the start of the business relationship.
Keep the amount of product or services you offer a company with less than perfect credit to a minimum until they've proven themselves. Once you begin doing business with a customer, make sure the customer is aware of
...when their payment is due. Close communication and follow-up are essential. This ensures that the customer is well aware of payment due dates. Offering discounts for early payment is a great incentive for many customers and a large percentage will take advantage of the discounts.
And of course, for those customers that run late in their payments, interest will be added to their late payments. Start calling customers and trying to collect the day after a payment is due. Never wait -- let them know that your company keeps close track of their accounts receivable. Until a customer is current on their bill, it would not be wise to extend any more credit with them. If the company wants to continue doing business with a customer who is past due in their payments, all future products or services they receive must b
on a COD (cash on delivery) basis.
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