Simply put, you must have a written credit policy that management buys into, that salesmen understand, that the credit department supports.
Some customers and contracts are not worth pursuing. They are black holes where the profit margin is razor thin and the contract terms are too difficult to meet.
Consider that the real purpose of any corporate employee is to create profits for the shareholders. Harsh but true.
A well written credit policy is the foundation of all credit decisions:
- It keeps the company focused on your core business
- Helps spot customers and projects that are too risky
- States whether your company is young and trying to gain market share
- Middle-aged and maintaining market share
- Mature and fending off the competition
A credit policy should set out the following:
- Credit limits
- Terms of sale
- The need for collateral
- When to cut off the customer’s credit
This should be your bible and must exist in writing. Levy – von Beck has assisted many clients in the development of a written, meaningful credit policy, of gathering support at the corporate level for buying into the policy, and of helping sales staff get behind the program.
Levy – von Beck has the same collection goals as our clients. Getting to principal isn’t enough. Reducing collection expenses by recovery of interest and fees helps to validate our services and to validate your choice of using our firm. Our bi-annual reports show clients the net cost of recovery (Fees charges minus interest and fees recovered).
Do you know what you are really paying for outside collection services?
Remember that all credit managers are, at some point, consumers of legal services. Think outside the box and let us help determine if you are really getting good value and returning maximum profits to the shareholders.