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What does a good credit policy look like?

What does a good credit policy look like?

A good credit policy ensures your products or services are more appealing to potential customers. However, granting credit always implies risks. How do you develop a balanced credit policy for your company? We list the do’s and don’ts for you.

Advantages of a credit policy

A credit policy delays payment for your customer, or breaks down the price into instalments on which the customer pays interest.

  • A purchase becomes more attractive.
  • It is easier for potential customers to justify a purchase.

The advantage for your company is that you sell more, but there is a greater risk of non-payment. A well thought-out credit policy limits the risks.

Pillars of your credit policy

The following elements largely determine the success of your credit policy:

  • Credit period: within which period must your customer repay the amount?
  • Credit standard: at what level of creditworthiness do your customers come into consideration for credit? Low requirements will boost sales, but increase the risk of late payments.
  • Collection policy: how do you deal with late payments? A strict approach results in faster payments, but will drive annoyed customers to your competitors more easily.

Other points of attention for your policy

  • Credit checks

Carry out credit checks: not only before granting credit, but also during the repayment period. Your customer’s financial situation can change quickly: regular checks will keep you one step ahead of payment difficulties.

 

  • Monitor your accounts receivable

Keep your accounts receivable ledger up to date and take action if invoices are not paid on time.

  • Keep the payment term as short as possible.
  • Process the debtor invoices in your financial administration.
  • Charge interest for overdue payment on unpaid invoices.

 

  • Relationship with your debtor

Maintain a good relationship with your debtor: this makes it easier to discuss problems and increases the likelihood that he/she will pay on time.

Do not be too aggressive or passive in your credit policy: the right balance is crucial to collect payments on time and to maintain a good relationship with your customer.

 

  • Clear communication

Avoid confusion by communicating clearly with your customer and the relevant departments within your company. Clear internal communication prevents sales staff from continuing to sell to defaulting customers, for example.

  • Communicate clearly about your terms of payment to avoid disagreements.
  • Save all communication between you and your customer so you have proof in case he/she doesn’t pay.

Ask our experts

Is your credit policy not yet up to speed?

Contact us for more information!

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The smart way forward with business intelligence

The data fairy tale

Once upon a time, you heard about the incredible riches hidden in your data. Vital insights into your organisation. And your financial figures. As well as your clients, products, potential risks and of course, the opportunities you have before you. The promise of untold benefits led you to collect data. Lots of data. But what comes next?

Analyse, combine, understand and decide

When it’s time to analyse your data, you’ll find it spread across different sources. A database in the cloud, Excel reports dating back years, and that customer data you need to store according to those super-sensitive privacy laws. Is all this data even relevant? It’s possible each source has something to say … But you need to extract this information. And combine it. Only then will you have the insight that gives you a clear picture of your situation and the best path forward.

The right tool for the job

The good news? There are tools that do this for you, quickly, cheaply and accurately. At the front of the pack is the Microsoft Power BI suite of tools. Power BI securely analyses data on any level, from the individual to the entire organisation, combining artificial intelligence, machine learning and natural language input abilities. Data preparation and discovery are easier than ever. And Power BI is not just for analysis; the visualisation capabilities make sure you see every little detail you need to see. You’ll never miss a thing!

No more writer’s block

Ever felt unsure about how to start a report? Google Data studio is designed to help you tell your story. It includes built-in sample reports to make it easier to put digital pen to paper. After finding, combining and analysing your data, it pours the important info into graphs or charts, geo maps or paginated data tables—whatever tells your story. The style options and different colour themes help you target the right audience.

User-friendly

Power BI and Data Studio also stand out for being wonderfully user-friendly. The reason we appreciate them at CFOrent? They don’t just make it easy for you to see the best course of action. They make it easy to show it to everyone else. And that’s a vital step whether you want to maximise your growth or minimise your risk.

Happily ever after

Do you still have doubts or questions? Maybe you’re not quite sure you’re on the right path. Perhaps you would like to have an experienced expert by your side. CFOrent is always at your service. As well as specialising in innovative business intelligence technologies, we have years of extensive hands-on experience in entrepreneurial finance. Get in touch. Let’s make your data fairy tale come true today.

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