creating a credit policy that prevents delinquent accounts

Creating a Credit Policy that prevents delinquent accounts and

results in fewer bad debts.Or

How to Get Paid

by Michelle Dunn

Determining how and who to extend credit to & setting credit

limits.

Gather customer information using Credit Applications.

Credit Applications will give you:

• Credit references

• Bank references

• Employment information

• Financial information

• Permission to check references

• Permission to pull a credit report

Determining your criteria for new customers that you want to

extend credit to.

What do you need to know?

To determine your criteria for new customers you will need to know:

• Your terms

• How and when you want to get paid

• How much risk are you willing to take

To determine how much credit to extend to a customer ask yourself:

• Do they have a pattern of paying on time or late?

• Is there chronic delinquency?• Is there a seasonal pattern?• Are poor payments due to employment

issues, change in marital status or a one time event?

• What are the customers anticipated monthly purchases?

If the customer is a business, ask yourself:

• Where is this business going & how long have they been in business?

• Who are their customers?

• What does the competition look like?

• Do they have any bankruptcies, filings or judgments against them?

Limiting your Risk

• Get a personal guarantee

• Offer month to month credit

• Offer ship-to-ship credit

• Ask for a security deposit

• Get a 50% deposit on every order

Setting payment terms, due dates and establishing penalties for late

payments

Your credit policy will be based on your terms, due dates & what you want to happen when a customer is late or

doesn’t pay

Setting your payment terms:

• How often do you want to get paid?

• Do you want to be paid upon completion of your work or would you like to offer 30 day terms?

• Maybe you want to offer 30 day terms with a discount if the invoice is paid in full within 10-15 days

Setting your due dates:

• No matter what you decide on for terms, choose a time of month you want to be paid. Such as the first or end of each month, the 15th or any date that works for your business.

What do you want to happen when your customer is late or doesn’t pay

you?

• Do you want their credit to be revoked?

• Do you want to put their account on hold for future orders until the balance is paid?

• Do you want to make a phone call or send a letter?

Organizing steps to be taken when customers are past due or over

their credit limit including bouncing checks

• Refer to your credit policy

• Make a collection phone call

• Send a friendly (or not so friendly) reminder

• Revoke credit

• Follow up

Utilizing your sales staff with past due accounts

• Do not oversell!

• Once the account is past due have the sales person who made the sale contact the customer.

• Withhold commissions until the item is paid for in full.

Easy Credit Policy Steps

• Print out or buy Credit Applications

• Put them at the front desk

• Have every new customer fill one out

• Mail one to every existing customer

• Check ALL references

• Email me with any questions

• Michelle@MichelleDunn.com

People owe you money?Want to collect it?

• Over 100,000 businesses have slow

or non-paying customers – learn how to collect that money quickly and

keep the money coming in with

Michelle Dunn’s books.