Running a business isn’t easy and it often means juggling lots of different parts – dealing with money coming in is one of the trickiest. Two things that play a big role in this are credit management and debt collection. They’re often talked about together, but they actually handle very different parts of the payment process.
Credit management is about working out which customers you can trust to pay, and setting up payment terms that work for both sides. It’s the step where you assess risk before offering credit. This might include checking a customer’s financial background, deciding on payment terms, and setting limits on how much credit you’ll offer them.
It’s basically about giving people a chance to pay later but making sure you’re not setting yourself up for trouble in the future.
Once the credit’s been given and the invoice is sent to the customer, you hope everything goes smoothly. But sometimes it doesn’t and that’s when it times to turn to ‘collections’.
Collections is the term for what you do when the payment hasn’t arrived. It might involve sending reminders, making phone calls, or even handing things over to a debt collection agency if the situation calls for it. The goal is to recover the money without burning bridges, although sometimes this can’t always be avoided.
Breaking it down:
So, what is credit management?
It’s really just a set of steps that help you stay on top of who owes you money and make sure you actually get paid. Good credit management keeps your cash flow healthy and helps you avoid chasing down payments later.
Here are a few smart practices:
- Have clear payment terms from day one, including what happens if someone pays late or early.
- Check a customer’s credit when they first start working with you, and keep an eye on it over time.
- Be flexible when needed—offering payment plans can help customers who are struggling, without letting the account go unpaid.
- Make sure your invoices are accurate and easy to understand to avoid disputes and delays.
And what’s debt collection?
This is the part no one loves, but it’s sometimes necessary. When a customer hasn’t paid—and all your reminders haven’t worked—you move into collection mode. That could mean anything from a polite nudge to full-on legal action (ideally, it doesn’t get that far).
If your team can’t resolve the issue, that’s when bringing in a professional debt collection service can really help. They know how to handle tough cases and often have more tools (and leverage) to get the job done.
Bottom line: credit management is about preventing problems, while collections is about fixing them. Knowing how to handle both makes a big difference in keeping your business financially stable.
At CRS, we help businesses take control of both sides—credit and collections—so they can focus more on growth and less on chasing payments. If you need help with either side of the process, we’re just a message away.