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timlea50
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Hi All,

It is a fine tune balance between sales and credit and will always be there. there are a number of ways you can also look at things – by setting up a “good cop” “bad cop” style of sales and credit management.

As the business owner (also probably the business’ main sales person) you can be the “good guy” providing customer service, but consider hiring a temporary credit controller or contracting a credit management company/facility. Providing they are professional in their approach they can be the “bad guys” – chasing your money – and if the client complains about them being tough – you can be the good guy and say you will “have a word” – but they are only doing their job…..but you still appear to be the good guy.

Equally if your customer is slow paying and wants more work – if you didn’t feel comfortable saying how about paying your first bill ….you can use your new found contracted-in skills to say your “credit department ” is saying you shouldn’t do any further work until you are paid…..more often than not most people will react sensibly and probably will be slightly embarrassed saying they didn’t realise the bills were “that old” ….

One other thing to consider also would be to use a factoring company that :

1) can provide credit control facilities (ie chasing debts)
2) can credit insure your customers at the sale time (against your credit approved customers going bust)
3) can provide cash upfront against the invoices raised (usually paying around 80% upfront within 24 hours) returning the remaining 20% when the customer pays.

They will usually charge you a fee for doing so – somewhere between 0.5% – 2.5% (dependent upon your turnover) and a cost of funds for the funds you decide to borrow (usually around 9%- 12.5% per annum.

You might be interested to know we have created an introductory white paper on factoring Factoring 101 – the basics you need to know which is available free of charge from our web-site at the address above.

As for charging interest – in my experience companies will NOT pay it even if you put it in your terms and conditions…..and it always begs the question if you charge it are you going to enforce the collection of it……

Good luck to all.

Regards

Tim Lea
cashstream.com.au