The best collection call is the one you don’t have to make
AR Best Practices is about preventing collections. It starts with making the most appropriate credit decision with the best available information. And once these decisions are made, they shouldn’t be set in stone, but constantly evaluated. Small businesses need stability now more than ever. And in today's economic environment, it is simply not enough to ask customers for a credit application up front and check a few references. Ongoing credit monitoring will alert you to buyers that are experiencing financial trouble and allow you to adjust your credit offering accordingly.
Use credit scoring to rate your buyer’s credit as Strong, Caution, Watch and No Credit (represented from green to red), to approve new trade credit applicants and to monitor the ongoing risk of your entire credit portfolio. A business that acts proactively based on the credit data of its customers is more likely to increase their AR portfolio value by establishing a stronger stream of revenues with less bad debt and fewer slow paying customers.
Our AR Best Practices credit scoring model offers several important benefits to help businesses determine the creditworthiness of their buyers. Credit information allows businesses to analyze the credit history of their customers. For example, by reviewing a credit classification based upon a commercial credit score from Equifax, businesses can determine the likely delinquency rate of their customers. In addition, businesses can set customer approval rates based on the credit classification of their customers and approve only applications with a high enough credit score to insure their sales goals. Also, businesses can continuously monitor the credit progress of their customers and be notified within 24 hours of any derogatory credit information that may affect their customers' credit standing and ultimately affect a business's accounts receivables.
Within our complete suite of AR services we provide integrated credit intelligence compiled from S&P, Moody’s, D&B and Equifax and ongoing credit monitoring, credit protection and lockbox services for much less than you could purchase these services individually for your business.
Setting payment acceptance policies of when to offer trade credit and to who is the key in reducing collections. Not all buyers or invoices are best suited for trade credit. In the red zone, we recommend that you accept card payments. Extending credit only to credit worthy buyers, coupled with implementing systematic routine admin procedures like placing invoice verification calls and sending monthly opening balance statements, will effectively reduce your ‘days-sales-outstanding’ and write-offs.
AR Best Practices’ credit scoring policy is a simple, precautionary step I can take to ensure that I'm working with the right customers and protecting my business. Mark Wecker, CFO of Southland Graphics