It is rare for goods or services to be sold on a cash basis with it being widely accepted for businesses to offer credit. Businesses will incur a risk in allowing the purchaser time to pay for goods or services supplied. To accommodate this business reality, businesses should ensure a sound credit management policy. The requirement to adopt effective credit control policies is underscored when considering new ways of trading such as by fax and e-mail as well as the traditional methods of letter and telephone.
Businesses should be aware trade Debtors often can feature as significant balance sheet asset. Are these assets real or merely illusory? The extent to which a trade debt can be converted to cash will answer this question. All businesses will have to ask themselves to what extent this asset will be convertible into cash. A fully integrated credit policy should address the following:-
- How should credit be approved for new customers?
- How should credit ratings and credit terms be set for new and existing customers?
- To what extent should new or existing customers be visited
- to give comfort that they will be good for the credit advanced?
- What action should be taken against customers should payment seriously be at risk.
- And remember "a sale is not a sale until it is paid for" So it is best to ensure the sales force is fully aware of the company's corporate credit policy.
And remember "a sale is not a sale until it is paid for" So it is best to ensure the sales force is fully aware of the company's corporate credit policy.