Mastering business credit management can be a game-changer for your enterprise. It's a complex field, but understanding its intricacies can unlock new opportunities and safeguard your business from financial pitfalls. Let's delve into the lessons that can guide you on this journey.
Learn from my mistakes and do better
How you finance your business affects how much it costs to run and whether you make profits. Paying yourself and suppliers not only costs money, it affects cash flow and income as well.
- In case you encounter a huge debt, it is easy to fail if you don’t manage credit wisely.
A rough example of a credit policy
Three simple rules: do not issue credit to people who are seeking to finance consumption, those people whose only explanation for looking for capital is because they need money to purchase something they want.
- Never offer any form of credit to someone you haven’t met face-to-face. A personal meeting helps you get answers about their background to give you a better idea of whether or not you want to trust them.
- Never lend money to people with a bad credit rating.
Credit management is the biggest lesson I have learned in the past 24 months.
I personally lost $6,000 to a client in Malta because of a lack of good business credit management. I don’t want you to make the same mistake
- Here is a guide on how to improve your credit management
Tips for savvy credit management
Establish credit limits for your customers
- This will help you to protect your business from possible financial losses.
- Check the credit rating of your customers before you extend them credit
- Never extend credit to customers who have a low credit rating
- Have someone dedicated to tracking debtors to your business
