6 ways to reduce risk when selling on credit
Have you ever heard a small business say it is not a bank? When you are selling on credit, you are a bank to your customers. You're offering them an overdraft free of charge. Of course, there are many benefits to selling on credit which CMR encourages, but at the same time we understand there are risks involved with offering this option.
Pros and Cons of selling on Credit
A fact of life is that a business cannot always be in the fortunate position of knowing and trusting each customer. A wise business must take every precaution to protect its cash flow. With any customer, it's important that the authenticity of a customer can be confirmed by identifying their name, address, phone number, email address and business/credit references.
At CMR, we look to support businesses through the whole process of selling on credit and supporting growth. Below are 6 means to reduce possible concerns with collecting debt:
- Reminder Notice - Send a reminder letter 7 days before the agreed upon date of payment, if you have not already received payment. This means the customer has every opportunity to point out if they are unhappy with the service/goods or didn't received the invoice.
- Read Receipts - Read receipts on emails are very useful when it comes to proving that an agreement you sent was read or that an invoice was received. Having as much information as possible, such as knowing an email you had sent was read as you can use the knowledge to your advantage.
- Stay Professional - Make a professional call to the customer at their office. During the call, be firm and remember to state the facts and identify specific payment terms and times. It is much easier to read someone's reaction over the phone compared to sending and receiving emails.
- Appointments - If the amount owed is significant, make an appointment with the customer and collect the funds. If they respond that the funds are not immediately available, keep the appointment and discuss specific payment terms and times. Face to face encounters are more effective as it is a lot harder for someone to lie when you meet them.
- Collection Agency - Unfortunately, if the customer does not provide any positive feedback and refuses to acknowledge your communication, contact a reputable collection agency that will represent your company in a professional manner. CMR has been debt recovery specialists as well as a provider of trade credit insurance for over 28 years. When a debt is passed to a company like us, the process is straightforward, your business will be paid unless the difficulty with your customer is more complicated.
- Credit Insurance - This insurance policy pays a claim in the event of a customer not being able to pay, whether that is as a result of insolvency or cash-flow issues. CMR's managed policy allows your business to grow and takes the stress out of signing new customers as you know you are protected. A trade credit insurance policy also allows you to identify customers and make sure they are creditworthy, so you do not have to spend valuable time researching a prospective client.
For a no obligation discussion about selling on credit and how trade credit insurance can help your business grow in a secured manner, please do not hesitate to get in touch. We can help you take the stress out of selling on credit.