How and why your business should consider tightening up its credit terms
Tightening up your business’ credit terms could help to save you time and money on chasing up late and non-paying customers.
Businesses across the UK are facing serious financial consequences due to the late payment culture that is leaving them waiting months for the money owed to them.
If you’re struggling to get your invoices paid on time and suffering cash flow problems as a result, it’s time to protect your business by reviewing your credit terms.
Tightening up your credit terms and accounts receivable processes can help to:
- Reduce risk – Peace of mind that you have terms in place to protect your business and reduce the risk of having to deal with late payments and write-offs.
- Improve cash flow – Tighter credit terms encourages faster payment of invoices, improving your business’ short-term cashflow.
- Save time – Chasing up payments can take up a lot of you and your employees’ time, taking you away from tasks that are more important to your business’ growth.
- Save money – Fewer write–offs and less time spent chasing payments means more money in your business.
3 ways to tighten up your business’ credit terms
Reduce payment terms
If you currently offer your customers 60 days to pay, try reducing your terms to 30 days. Research shows that the shorter your payment terms are, the faster you are likely to receive payment.
Tighten credit requirements
Review your business’ credit requirements for taking on new customers. Consider tightening your requirements to reduce the risk of working with problem payers.
Request larger upfront payments
Ask customers for larger upfront payments to reduce the amount of credit that you are giving out and increase your working capital.
If you don’t want to change your credit terms for all customers for fear of putting new customers off or upsetting existing reliable customers, consider tightening your credit terms for select customers – such as those that regularly pay late or have a less favourable credit history.
For more help or advice with arrears prevention and debt collection, speak to our team of experts here at Churchill Recovery by calling us on: 0333 320 0748.