If your company has been an involuntary participant in the “Great Recession”, then you’ve probably experienced changes in your Accounts Receivable position over the past few years. Assuming your business sells to other businesses (B2B), it’s likely that you’ve lost some marginal customers and noticed your best clients paying even more slowly than in the past.
Your credit policies can affect your company sales as well as bad debt. If your credit policies are too loose, then your sales will likely increase — but typically be accompanied by a corresponding increase in bad debt. If your credit policies are too tight, then your bad debt may be reduced, but your overall sales may be lower as a result of your restrictive credit limits.
Going back to basics begins by assessing where you are and determining where you want to be with regard to your overall credit policies and collection efforts. You must determine how proactive you can afford to become. For many businesses, this is a crucial time to become much more proactive in credit and collections processes.