Credit makes the business world go round and so in most industries extending credit to customers for goods or services supplied is the norm.
But not all businesses are financially equal so it is unlikely that all of your credit customers will have an equal ability to repay you when required.
In addition, a recession can have a significant detrimental impact to a large number of businesses, cash becomes constrained and inability to pay becomes a contagion. So what can be done about it?
It would be advantageous for you to be able to identify high credit risk and low credit risk customers and from that analysis specific actions can be developed that maximise your chances of cash recovery.
By the way, identifying low risk customers means that your best customers can be spared unnecessary follow up.
Check your current credit risk position by using our DSO Calculator.
Expert analysis to identify high and low risk customers. From there specific plans can be created that can maximise your cash position in case of non-payment. In addition security options can be considered & options proposed that give you a better chance of future cash recovery.
Your terms of trade are a cornerstone of good credit management. These can be reviewed to ensure the relevant terms are included. Important terms include cost recovery clauses, payment terms, actions on non-payment and, if you supply goods, Personal Property Securities Act clauses including retention of title.
There are many different types of business legal entity in New Zealand, including limited companies, limited partnerships, partnerships and joint ventures. Each have their own unique characteristics which need to be taken into account when contracting and when deciding upon relevant securities.
Cashflow is of course of primary importance to any business. So for the ultimate in getting peace of mind you can’t go far wrong with a comprehensive Credit Audit. Your current arrangements with respect to credit, including customer risk, contracts and legal compliance are thoroughly reviewed. For more information click here.