One of the main reasons for small business failure is poor credit management.
Now the problem is
Many people will not deal with you without credit yet it is too easy to sell on credit to a customer and as they come in, for your staff allow them to get more and more money outstanding, and then you find out later that you are looking at a long and big problem trying to collect it all. I know from personal experience trying to recover debt can be stressful and time-consuming and it is also a great way of making enemies.
Often what we see is retailers often have to make deals to get most of the debt so you’re just leaving money on the table
This is why it is so essential to make from day one for each debtor a credit limit. It then becomes a management decision if the debt goes over a certain amount. Once the credit limit is reached (the account is maxed out) and our POS software will not allow any more purchases on the account unless some of the debt is paid or you make a management decision to increase the credit limit.
Here is how we do it
In your system, click on the main menu to customer > customer maintenance
Now call up a customer, now click Other Details. (see green arrow below)
There are two options that I would like to run through with you.
You can select a credit limit for a period, a big problem with majors is that they have the money, but they take a long time to pay, so in this case, you may want to give them a large credit limit but watch if they go over time.
The next option is that you can decide whether the account if it goes over the credit limit should be stopped or whether the operator should be warned so you can be notified. While they are in front of you and they want the goods is the cheapest and best place to collect the debt.
Trust me. It’ll all be worth it to do this.
Allow people to get more credit limits over time, start them small and let the amount build up.
I also would recommend too that every year to do a review of your credit limits.
