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If you are a business owner, you may have also experienced right now that you will be a credit controller as well. Therefore, you will need to look at the credit control system and the reason of its importance. Though you may receive many sales on your business, without proper methods in collecting debts, your coffers will cease your business to exist. Credit Costs One of the greatest hidden costs in any business face today is the credit cost or the cost of credit. An interest that is received and paid would mostly be a low priority on a debtor’s allocation cost. Even small debts can give negative impact. Credit Policy One of the objectives of this policy is to allocate sufficient amount of credit flow and ensures minimum credit cost, and this includes bad debts. The credit given should be balanced against the consumer’s needs and create a boundary line to avoid overspending the coffers. Because, if a consumer would over use their credits from what they really need, it would be difficult to recover from a bad earned debt. Furthermore, too little credit may curtail the customer’s business expansion and lose sales from their business as well. Creditor’s golden rule The Golden Rule in Credit Control System is to state your terms and conditions and stick through it. Majority of the problems in controlling credit problems inflicts back. So, people would be afraid to ask for information that they should need to know in the first place as part of constructing agreement. Credit sources There are vast amount of information in regards to credits with different levels of value. Setting up your credit is like putting pieces of the puzzle together and it is only then recognizable when its image emerges. So, here are the three sources that you should look out to: 1. External: Trade and bank references, credit bureau/register reports, newspapers and journals, other credit controllers. 2. Internal: Sales ledger, credit data banks, sales peoples’ reports. 3. Specialist: Profit and loss accounts, balance sheets, source and application of funds statements, cash flow forecasts. Monitoring the sales ledger Credit is made out of two things, time and amount. But, time is the one that needs attention. Example, $20,000 debt in 6 months is greater than $6,000 debt in 2 months. Therefore, it is essential that your Credit Control System would ensure that: 1.Goods and services are invoiced on dispatch and 2.Potential problem accounts are spotted as early as possible. You must therefore realize the methodology of credit control and slip in to the shoes of the consumer who might be trying to delay the payment. This requires a burden of giving them your invoices, statements, stop letters and other types of communications. But this difficult Credit Control System can be solved if you would like to use a low cost and effective debt collection system. Like, iCollect. That way, no more hassles in dealing with hard-headed debtors and let the system do the rest.
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