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Managing new and existing clients' debts

Business Insurance Trade Credit Insurance

As a small business owner, managing your debtors is crucial to your business.

If you don’t have a process to identify clients who become troublesome and don’t pay their debts on time, you could face serious financial losses. The following is a brief guide of identifying some of the warning signs to look out for and tips to better manage creditors. In addition, it’ll explain why many clients have Trade Credit Insurance in place to assist in managing the financial risk for non-payment.

Evaluate Financial and Credit History:

Prior to doing business with a new client, it’s important to perform due diligence and evaluate their financial and credit history. This will help you identify any potential red flags that may indicate a higher risk of non-payment. Check their credit score, payment history, and any negative marks against their business.

Set Clear Payment Terms:

To avoid confusion and disputes with clients, it’s crucial to set clear payment terms from the start. Make sure your payment terms are outlined in your contracts or agreements, including due dates and any late payment fees.

Use Electronic Invoicing:

Electronic invoicing is a convenient and efficient way to send invoices to your clients. It helps ensure that your clients receive invoices promptly, and it makes it easy to track when invoices are sent, opened, and paid.

Provide Multiple Payment Methods:

Offering your clients multiple payment methods, such as credit cards, PayPal, or wire transfers, can help them pay you easily and quickly. This can reduce the risk of late payments and increase the chances of receiving payment on time.

Outsource Management of Your Company’s Accounts Receivable:

If managing your accounts receivable becomes too much to handle, consider outsourcing the task to a professional debt collection agency. This can help you recover outstanding debts and improve your cash flow.

Warning Signs for New Clients:

When taking on new clients, it’s essential to be vigilant and identify any warning signs that may indicate a higher of non-payment. One of the most significant warning signs is when a new client places a large order and offers to pay later. To reduce your risk, consider asking for cash before or on delivery for the first six to twelve months.

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Warning Signs for Existing Clients:

Just because an existing client has paid on time does not mean they will continue to do so in the future. Some warning signs to watch out for include late payments, breaking terms, and lack of communication. If any of these situations occur, it’s important to communicate with the client and try to work out a solution. If this isn’t possible, you may need to consider cash on delivery for future orders or enlist the help of a debt collector.

In conclusion, managing your creditors is a crucial aspect of your business’ financial health. By evaluating potential clients, setting clear payment terms, doing electronic invoicing, providing multiple payment methods, and outsourcing management of your accounts receivable, you can help ensure that you receive payments on time. Additionally, by identifying warning signs for new clients, you can take appropriate action to minimise the risk of non-payment and protect your business’ financial health.

Trade Credit Insurance provides financial protection and peace of mind for businesses in a situation where customers owe money for products or services do not pay their debts or pay them later than the payment terms dictate. It gives businesses the confidence to new customers and improves access to funding, often at more competitive rates.

Your insurance specialist is a professional that can advise you today.

General Advice Warning: This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.

All information above has been provided by the author.

Insurance Advisernet, ABN 15 003 886 687, AFSL 240549

This article originally appeared on Insurance Advisernet News and has been published here with permission.