Business Credit Management: Things To Know
Whether you are a small startup or a Fortune 500 company, one thing that doesn’t change is that no business can run on an entire cash basis. You need to give your customers products or services on a credit basis. However, ensuring that the credit does not turn into bad debts is tricky, and that’s where a good business credit management policy comes in.
Here we give you a rundown on building a reliable credit management system for your business.
What is Credit Management?
Credit management is a system that helps you establish a standard process for giving credits to your customers and collecting them back. It has set guidelines for every activity, including credit approval to payment collection, so your invoices are collected on time, and there are few losses.
Why Do You Need Credit Management For Your Business?
There are several benefits of having a credit management policy for your business. Some of the most prominent ones include:
A reliable business credit management system ensures that your invoices are encashed on time. It gives your business the liquidity it needs to keep things running.
Reduce Bad Debts
One major drawback of not having a proper recovery system is that your losses increase in bad debts. You have more late payments than on-time payments. A reliable credit management policy can help you track payment defaulters and recover their invoices on priority. Quickly.
Improve Your Standing With Lenders
No one wants to invest in a business that cannot recover its money from customers. Every lender would investigate your cash flow status before they lend you money, and if your outflows are more than your inflows, it does not improve your chances. Having a credit management policy in place can change that.
Better Growth Opportunities
When you don’t get payments on time, you dig into your reserves and working capital set aside for other essential business pursuits. However, with proper credit management policies in place, you can ensure that you don’t have to use your investment reserves. You will have the sales proceeds to carry out your business’s day-to-day activities.
Plan For The Future
A credit management system helps you keep track of your upcoming payments and recover your late payments more efficiently. It ensures that you have a better picture of your finances to plan for your future. Nowadays, online portals like CreditQ help a businessman in every step, whether a settlement with a defaulter or checking a business information report.
CREDITQ is India’s 1st Business Credit Management & Information Platform. It facilitates both Suppliers and Buyers to initiate a Business Transaction and get an acknowledgment for the same. It also provides a platform for MSME, businessmen, GSTN holders to report their business credit defaulters. They can also generate the CIR to know the credibility of a new client before doing business with them. CREDITQ is a women entrepreneurship registered in DPIIT as a startup. It is available on the web & App (android & iOS both).