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- Identify what credit is normal for your industry, and decide what credit period - if any - you need to offer customers to be competitive.
- Consider ways of minimising credit risk such as offering discounts for payment with order, factoring your invoices, or accepting credit cards.
- Draw up a clear statement of your payment terms, and bring it to the attention of any customer applying for credit; include it on all order forms, invoices and other financial documentation.
- Terms should reserve your right to charge interest for late payments under the Late Payment of Commercial Debts (Interest) Act.
- Use a credit application form to collect customer details, including a named contact, bank account, and trade references.
- Assess the customer's creditworthiness - through a credit reference agency and trade references from genuine core suppliers - before granting credit.
- Restrict the credit limit to an amount you can afford to finance and, in the worst case, to write off; set low initial limits for new customers.
- Establish where to send invoices, what details the customer will require, and whether they have any regular invoice payment dates.
- Check outstanding credit balances when new orders are placed; be prepared to require cash payment if a customer exceeds their limit.
- Fulfil orders correctly and obtain proof of delivery; sort out any problems immediately.
- Invoice promptly and clearly; send monthly statements detailing outstanding invoices.
- Chase payments in a firm but friendly fashion as soon as they are due.
- Regularly review customers' payment records and outstanding balances; be prepared to stop offering further credit to bad payers.
- Monitor total credit outstanding in relation to turnover, and how quickly you are being paid, to check that your credit system is under control.
- establish payment terms before you start selling on credit
- set and enforce credit limits
- chase payments as soon as they become due
- provide credit without knowing your customer
- offer credit you can't afford
- be afraid to insist that customers meet their payment obligations
- continue extending credit to customers with poor payment records