Article 1: An Overview of Small Business Credit and Collections. This is a first in a series of blog postings from our online invoice factoring firm. If you like this articles please follow us on facebook or twitter (see follow buttons on the right).
Gone are the days when a business could truly function while operating on an up-front, cash-only basis. Today’s companies must offer credit to their customers in order to remain competitive, succeed, and grow. However, that does not mean small businesses must extend credit to any and every customer who asks. Rather, it means that small business owners must educate themselves on credit and collections so they can make informed decisions about extending credit and managing risk.
In this five-part series, we will discuss methods of managing credit risk for small businesses. Specifically, we will address the benefits of having a uniform credit policy, the advantages of using accounts receivable factoring services for small business financing and risk management, and the specific ways in which Fast A/R Funding and a factoring facility can help your business in this area.
First, it’s important to keep in mind that every customer has a unique credit history which must be evaluated in a uniform manner before you determine whether to extend credit, how much to offer, and what terms to set. Being able to make informed decisions about offering credit is essential to your business’ success. The best way to make these determinations is through the implementation of a solid credit policy. Our factoring firm has created this type policy that our clients benefit from.
Once you have a strong policy in place, the next step is proper implementation, and that means documentation. Lots of it. Balance sheets, operating statements, aging sheets, credit reports, customer credit files, and informational documentation are all key elements in managing credit risk. For small business owners, and particularly for those with start-up companies, the workload associated with extending credit to customers can be daunting. This is where Fast A/R Funding and online invoice factoring can help.
Fast A/R Funding is an accounts receivable loan provider. We factor invoice, providing companies with working capital that would otherwise spend weeks or months tied up in accounts receivable. However, Fast A/R Funding goes beyond funding by helping with credit assessment and risk management. Because Fast A/R Funding has access to advanced credit-screening tools not typically available to smaller companies, we are able to provide high-level analyses of your customers’ credit histories and help you decide when to extend credit, how much credit to offer, and what type of terms to offer when selling your accounts receivable.
As well, we are able to help you determine when a customer represents an unsafe credit risk, enabling you to present that customer with more appropriate options. After all, you don’t want to turn away a customer simply because s/he poses an unacceptable credit risk. Working with such customers on a cash basis can help you maintain the relationship and keep the business while the customer rebuilds his or her credit.
