One of the biggest mistakes a company can make when it comes to their accounts receivable is not implementing a credit policy. Establishing a credit policy that everyone must follow ensures that you will not be conducting business with a company with a reputation of never paying on time – or never paying at all. However, a lot of small businesses struggle with where to start when establishing a credit policy in QuickBooks, so we’ve highlighted all the important tips for creating a credit policy.
- Create a Credit Team
Not just anyone should be in charge of choosing which customers can get credit or not. This should be a person (or team) who you trust can make good decisions for your company. If you simply allow anyone in the accounts receivable department make these decisions you will end up with a wide range of companies all allowed to purchase from your company on credit, with not many paying you back.
- Track Customer Records
The first time that you approve a customer to purchase on credit should not be the last time you look at their account. Sometimes circumstances change and a company is struggling to make payments on time. Unfortunately, you may have to reconsider if you can continue working with them. Make sure that your credit team is continually checking up on customer’s credit reports.
- Set Limits
When establishing a credit policy in QuickBooks, you should have a max limit that a first time customer can order on credit. Your credit team should not be allowing a new customer, no matter how good their record is. You can always increase a customer’s limits once they have proven to be an on-time paying customer.
- Set Rules
Sometimes the credit team can come under pressure from the sales department to increase the credit limits of the customer. The credit team should be able to fall back on a set of rules so that they can put their foot down when needed. Have set criteria that a company will need to meet in order to have their credit limit increased. If they don’t meet every standard, they will not be eligible for an increase.
- Ensure Your Credit Policy is Followed
Once you have established your credit policy with QuickBooks, make sure that all your employees and credit team follows the policies. Have someone that the credit team can go to when they have questions about a specific customer. This will help to ensure that your credit policy will be followed, no matter what the scenario.
If you enact these policies for your credit team you can ensure that not many untrustworthy customers will end up on your list. Having trustworthy and reliable customers is one of the easiest ways to make sure you have cash flow and healthy accounts receivable.