How an updated Credit Policy can influence the accounts receivables of a company positively and exponentially increase its profits.

Simply put, a Credit Policy is a set of guidelines that sets credit and payment terms for customers.  The Credit Policy is a critical component for any business and its survival. A good Credit Policy will generally do four things:

1. Determine which customers are extended credit.
2. Set the payment terms for parties to whom credit is extended.
3. Define the limits to be set on outstanding credit accounts.
4. Outline the steps or procedures used to deal with delinquent accounts.

The problem with many companies is that the Credit Policy is not reviewed or updated on a regular basis and many times not enforced.  Second, control measures on how the Credit Policy is impacting the overall business are limited or even non-existent.

Delinquent accounts are an issue for every business and often are addressed after the fact resulting in a charge off.  Without a set credit review process in place for each customer on a regular basis, the probability for write offs is significant to the business. Finally, few businesses understand the impact of Days Sales Outstanding (DSO) and the negative affect DSO’s have on the cash flow of the business.

For any business to maintain its profitability through its accounts receivables, a working Credit Policy must be in place. If you already have a Credit Policy that proves ineffective, you can analyze your current policy by using our Credit Policy Calculator which weighs every area of your Credit Policy along with your current accounts receivables processes and helps you streamline your business for optimal performance and profitability.

Changing the mindset of a business as it relates to their Credit Policy and accounts receivables from Terms to NOW has a dramatic impact on the bottom-line profitability. Why be the bank for your customers?  Protecting the targeted Profit Margin for a business is critical for its survival, success, and growth.

End Goals

After using the Credit Policy Calculator to completely overhaul your Credit Policy as it relates to your account receivables, you can be certain of having the following results:

• Accelerated Cash Flow
• Reduced Bad Debts/ Write-Offs
• Optimized Efficiencies
• Improved Profitability
• Mitigated Risks
• Earned Trust and Reputation

Functions and Processes

From creating and sending out invoices, collections, posting of payments, receiving checks in the mail, to identifying credit risk customers, reconciliations, refunds and all payment acceptance media, all require the right processes that need to be reviewed and completely overhauled.

These processes also have associated costs – whether they are hard costs (directly related to the process) or soft costs (indirectly related to the process).

You can leverage technology to limit associated costs. Payment methods have evolved over the years with the advent of Fintech industries that make payments seamless, reliable, cheaper, and effective.

In reviewing your Credit Policy with regards to these functions and processes, there are certain salient questions that you have to answer.

Questions like:

• What are your true costs? Are they hard or soft?
• Who is the end processor of your transactions? Understand the flow.
• Why are you doing what you are doing concerning your accounts receivables?
• Are you leveraging on the powers of technology to reduce payment costs in your company?
• Are your payments done online, in person, with a payment portal/hosted payment page, or called in? All these need to be reviewed.
• When last did you review your accounts receivables and your Credit Policy with profitability at the fore?

Credit Policy Calculator

Your Credit Policy is fundamental to the growth of your business and it’s also a means of survival in the competitive market. It can influence your accounts receivables and can impact the profitability of your business or company. However, if your Credit Policy is not functioning optimally, this goal won’t be achieved, hence a total analysis and review of your Credit Policy using the Credit Policy Calculator.

What this tool does is to help you analyze your current process – remember the functions and processes stated earlier, which are inherent parts of your Credit Policy. It also helps you determine your true costs (hard or soft) in your accounts receivables.

Furthermore, this Credit Policy Calculator can help you achieve the following:

• Compare the cost of credit and checks.
• Review the impact of your Credit Policy on the profitability of your business.
• Show you how an optimal Credit Policy can impact costs.
• Help you discover the overall costs of the payment methods you are using.
• Can help determine policies for your company.

In the end, the primal goal is to see that your Credit Policy is efficient enough to impact your accounts receivables and in turn, lead to increased profitability.

Our Credit Policy Calculator is a great way to better understand your needs. Input your data below and we’ll email you a summary report.

Analysis

The Credit Policy Calculator created can run an analysis on any Credit Policy. The analysis involves gathering information on the current process. After the information has been entered into the Credit Policy Calculator successfully, a report will be created based on the information obtained.

Afterward, a meeting will be scheduled to properly review the results before the next line of action will be effected based on the review.

Technology

If you are not leveraging technology in the payment processes of your Credit Policy, then you are leaving money on the table. You are also looking at a low hanging fruit and failing to pluck it. Consequently, the ultimate formula here is:

Credit Policy + Technology = Improved Profitability

If you are trying to get a hang of the entire concept of infusing technology into your Credit Policy for maximum profit, don’t sweat it. We have an excellent payment gateway available to help you achieve this seamlessly.

This payment gateway isn’t going to affect your existing accounting process but will streamline it for effectiveness and sustainable positive outputs.

The Payment Gateway can do the following for you:

• Robust API that integrates with existing accounting systems.
• Company branded customer portal for making payments and viewing of invoices.
• Online reporting portal.
• Capable of handling all Payment Acceptance Methods (Email, invoices, in person, online, and phoned in payments)
• Customized Click to Pay Button.
• Level II & Level III data included with credit card transactions resulting in lower interchange costs.
• Installment Billing.
• Recurring Billing.
• Streamline invoice processes.

With all these technological features integrated into any credit policy payment system, there’s hardly any room for lapses that will amount to a decline in profits.

Conclusion

Reviewing the existing Credit Policy is critical for a businesses success. Utilizing the Credit Policy Calculator assists with the review of existing functions and processes, performs an in-depth analysis, and shows how updating your Credit Policy can be streamlined to help you achieve your goals. But most importantly, calculates the impact on the enhanced profitability your business can realize.