How to effectively manage credit risk by customers

[Augusta]

You know that a lot of business high turnover comes from the high level of credit taking customers. Customers would be willing to take more goods or products if you offer them credit sales. This credit giving isn’t always the problem but the problem of them paying back. It behooves on you the business owner to take up the responsibilities on your own side to avoid or reduce high bad debt. You can always do the following to manage credit risk

• Study the customers before giving out your goods to such a customer on credit. Check their level of creditworthiness
• Do a business credit monitoring to be alerted early enough to when a customer has started defaulting in payment. This will help you be proactive with your decision concerning such a customer
• Follow up each debtor with timely reminder: you can install an automatic reminder to make you remember t text the customer after some days and follow up ith phone calls when there is no response

You can threaten to take action when the initial defaulting set in. let the customer know you wouldn’t mind registering a default if the customer isn’t responding in a specified time you would be given.

What’s your thought on this?

 

[Caramelle]

A business should always require and verify business references for customers who are requesting credit.

Dealing with customers is a sensitive matter that we shouldn't take lightly. In practice, most businesses will assign different persons for the job of selling and collecting. The salesperson may help in the collection, but the receivables and collections employee will take a more active role in the collection. Salespeople can continue to do their PR, marketing, and selling job while the collections employee takes care of the collecting work.

Credit terms and the credit relationship should be clearly stated in the contract, invoice, and statement of account. This ensures that the client is knowledgeable about the terms and will expect appropriate actions in case of default. Depending on the length of the term, the seller will usually send a reminder a week or so before the due date. A call is also made on or before the due date to follow up on the payment. In cases of delay, another call is made while a statement of account and a written reminder are also sent to the client. This is done on a weekly basis until the customer pays. Calls may also be made several times a week. The client should feel that the seller is not letting up on the collection activity. In all cases, the collector should always maintain professionalism in all dealings with the client. It also helps to establish a pleasant relationship with the collector's counterpart on the client's side.

After exhausting all efforts to collect, the collector may inform the client that their account will be turned over to the lawyer for legal action. The collector, at this point, may still give the client a final option to settle.​

 

[Fatima143]

As we know in this era customers credit going are very high so there is no possibility to avoid this kind of thing in present world. On the other hand
Study customers before giving out your goods to such a customer on credit. Check their level of credit worth in essential now a days.
It is helpful too for the good relationship between customers and product dealrs as well. And calls may also be made several times a week for credit customers. The client should feel that seller is not letting up on the gather activity. In all cases, Calls may also be made several times a week. The client should feel that the seller is not letting up on the collection activity. In all cases, the collector should always maintain professional in all dealings with the client and the collector should always maintain professional in all dealings with the client.

 

[Kingsley]

In business there are some things we consider as a part of the business systems and hence we can not do without allowing it to transpire in the business circle and one of such is credit sales. In the accounting concepts and conventions there are provisions made specially for credit sales accurals and prepaid, there are books that are aside aside for the purpose of of credit purchase and credit sales whichI are the sales day book and purchase day book. All credit entries do not go into our cash book but in to the day books.

We allow for credit facilities in business so as to help either the wholesaler, retailer or the final consumers themselves to purchase goods or services and pay at a later date as agreed between us and them. This is done in a bid to allow us to move our stocks out of the shop or warehouse. And eradicate the possibility of a tied down capital. It facilitates our sales volume.

The only down sides to this facilitates that we grant our customers is when they begin to default in their initial agreement or even a death of a customer can sometimes invalidate the agreement and leading to a bad debt or irrevocable debt and losseson our part.

 

[Good luck]

The record of such customer will determine if the credit can be effectively manage and if such customer can still retain its integrity in the company.company can only stand if it can manage some clients and this depends on the numbers of years that two two parties have been dealing with each other.but if such client has defaulted in payment then it is going to be risky to continue dealing with the fellow or customer.

 

[funmi]

We all know it is almost inevitable to sell goods or service without selling on credit, as some customers will always come and apply for credit facilities due to the economic sitations in the country at this time. hence we must look for every available avenue to secure our business from risk that might arise from selling goods or services to a customer that may eventually become untrustworthy. I have seen people who have done the mistakes of issuing out a good or service on credit that later regretted that actions as the customers turned out to be a troublesome one. This has made it eventually impossible for the business owner to retrieve his or her money because some customers might even refuse to pay for what they bough on credit. This will make the business to suffer bad debt.


Hence it is advisable to always check the track records of the customer to.ensure they have a very clean profile and that they will.be capable of paying back as at the agreed time. Infact it will be wise sometimes to ask the customer to bring some sought of guarantor or a collateral just in case they fail to keep to keep to their promises.

 

[Alexandoy]

In my experience in business it is hard to refuse purchases by credit if the customer has been with us for a long time already. For new customers we do not allow credit purchases. They have to pay in cash (or by check) otherwise we wouldn't take in the order. There are times that a customer has no cash so he would request for a delayed payment. What we usually give is 15 days or 2 weeks but for valued customers it is 30 days. However, there are valued customers that wanted to pay in 60 days credit which is quite disadvantageous to us. That long term for payment is what made our cash flow tight that sometimes I had to borrow money to finance our own purchases. When the customer would not pay on the agreed date that would be the last credit purchase for him. We would be on the losing end if after 30 days we still could not collect payment.

 

[Stena]

Most times it is difficult handling customers who default in paying off credits. This seems to be inevitable in businesses, as there would always be customers, especially long standing ones who would want to get products on credit and request for delayed payment. It is always difficult to refuse them.
The problem lies in their inability to pay back, and when strict measures are followed, it makes the business owner look harsh.
I have encountered a customer who purchased a hundred fingerlings from my farm and requested delayed payment, he told me what date he was going to pay and I agreed to follow him up. Prior to the said date, I sent him a reminder, and there was no response from his end. The said date for payment came and there was no sign of payment. I had to on my own give him a week more. The thing is, the man did not even come to state his reason for breaking the deal. To cut the story short, I had to get him arrested and made sure he paid every dime. He never made a comeback, and that was understood, I never wanted such customers.
This issue of delayed payment by customers can make a business run at a loss, so its best to offer such privileges to very reliable customers or not at all.

 

[Brackwom]

In my experience in business it is hard to refuse purchases by credit if the customer has been with us for a long time already. For new customers we do not allow credit purchases. They have to pay in cash (or by check) otherwise we wouldn't take in the order. There are times that a customer has no cash so he would request for a delayed payment. What we usually give is 15 days or 2 weeks but for valued customers it is 30 days. However, there are valued customers that wanted to pay in 60 days credit which is quite disadvantageous to us. That long term for payment is what made our cash flow tight that sometimes I had to borrow money to finance our own purchases. When the customer would not pay on the agreed date that would be the last credit purchase for him. We would be on the losing end if after 30 days we still could not collect payment.

This is nice that after 30 days you could not collect payment.