Small Business Credit and Collections

Credit and Collections is a key function performed or supervised by the owner in a small business. It provides more business than possible otherwise, but it also creates a significant level of financial risk. Familiarity with the credit terms of one’s industry and the typical bad debt experience in that industry is important to know. A bad debt experience of 1% of sales is considered a cost of doing business in some industries.

The credit, collection function should be organized with written policies and procedures concerning: credit application, checking credit, granting credit, following up credit granted and collections. Applications should be based on industry standard forms with at least three commercial references. Local credit agencies and possibly national agencies should be joined to provide the best possible basis for the credit granting decision. Credit limits should be established based on the time in business, the legal form of the business entity, their credit history, financial stability based on financial reports and the volume of business. Sole-Proprietors should be asked to sign a personal guarantee. You would start with a smaller number and based on the applicants payment history increase the limit as general economic conditions allow and their payment history justifies. Credit should be monitored regularly based on an aging of the account.

Follow-up should begin with confirming receipt of the invoice. Then at regular intervals +30, +60 and +90 the follow-up process should be routine and worded to reflect the seriousness of the time past due. At an appropriate point the account should be suspended until payment is received and the account is back to within terms. At the 90 day point a letter should go out notifying the customer that if payment is not received promptly the account will be forwarded to an attorney.

Bad checks can be filed on in the Justice of the Peace office in the State, County and Precinct where it was passed. Checks should be marked NSF or account closed. Stop payments have to be filed on in civil court. Each NSF check should be accompanied with proof that it was mailed as certified in an attempt to collect the debt before it can be filed on in court. Account closed checks can be filed without the proof of certified mail. An affidavit must be completed, signed and notarized. The original returned check, proof of certified mail and the affidavit must be submitted together.

These actions will not guarantee payment, but they will eliminate any surprises that could have been foreseen if due diligence was exercised.

Allan Lindquist is an Accountant with 30 years experience in various positions up to and including VP Accounting Manager and Treasurer/Controller with Profit and Non Profit Organizations. He brings unique insight, clear instructions, and over twenty-five years of experience to all of his Accounting articles. Owner of Lindquist & Associates, Al

Posted in Uncategorized | Tagged , | Comments Off on Small Business Credit and Collections

6 approaches to improve Your credit – And store thousands of dollars

make certain Your credit document is a hundred% CorrectAbout 70% of credit reports comprise wrong data – so that it will enhance your credit, it is important which you take motion to repair this. credit score Bureaus will no longer voluntarily repair your credit – don’t forget – they exist as ‘for earnings entities’ and updating credit score records is how they make their cash. There are pick out official corporations that will help you dispute questionable items or you may do it yourself.display Your Open AccountsAnother proactive measure you could take to improve your credit score is to modify and screen your open money owed. Pay attention and do not forget ultimate, unused debts, excessive interest, annual rate money owed. try and most effective have at maximum 6 money owed open, all in top standing and all with a prolonged records.limit packages for new CreditCredit bureaus interpret many new credit inquiries as a sign of economic turmoil. If you are attempting to open loads of recent accounts over a brief time frame it could seem like you are sporting extra debt than you may cope with. Step 3 in improving credit score is to restrict packages for brand spanking new credit score.Pay Your bills On Time.This appears apparent but no longer doing this can have the best terrible impact in your credit score rating. enhance your credit score by doing away with late payments or collections out of your credit history.recognise Your credit Card restrict – live under 35% of your MaximumLenders such as you to stay properly beneath the maximum on all open credit score cards. hold Your stability at 35% of the most on all open cards. as an instance when you have a $2000 credit cart restrict / max balance need to be $seven-hundred. improve your credit and hold the stability under 35% of your restrict.Time Improves credit score ScoreWhen you set up a protracted credit score records and your credit file reflects responsible, timely price. you could improve your credit score and benefit from this ‘growing older component’. you could need to preserve your oldest account open on your credit score document so as to reveal ongoing use of desirable credit.Why not get a free credit file and see where you could enhance your credit? Why not be proactive and try this earlier than any crucial want for credit score occurs to your existence, it may prevent thousands of dollars over the lifestyles of any mortgage you are taking on.

Posted in Uncategorized | Tagged , , , , , , , , , , | Comments Off on 6 approaches to improve Your credit – And store thousands of dollars