How Your Credit Policy Impacts Profitability For Your Company
How An Updated Credit Policy Can Influence The Accounts Receivables Of A Company Positively And Exponentially Increase Its Profits. Simply Put, A Credit Policy Is A Set Of Guidelines That Sets Credit And Payment Terms For Customers.
Determine which customers are extended credit.
Set the payment terms for parties to whom credit is extended.
Define the limits to be set on outstanding credit accounts
Outline the steps or procedures used to deal with delinquent accounts.
The problem with many companies is that the Credit Policy is not reviewed or updated on a regular basis and many times not enforced. Second, control measures on how the Credit Policy is impacting the overall business are limited or even non-existent.
Delinquent accounts are an issue for every business and often are addressed after the fact resulting in a charge-off. Without a set credit review process in place for each customer on a regular basis, the probability for write-offs is significant to the business. Finally, few businesses understand the impact of Days Sales Outstanding (DSO) and the negative effect DSOs have on the cash flow of the business.
For any business to maintain its profitability through its accounts receivables, a working Credit Policy must be in place.
If you already have a Credit Policy that proves ineffective, you can analyze your current policy by using our Credit Policy Calculator which weighs every area of your Credit Policy along with your current accounts receivables processes and helps you streamline your business for optimal performance and profitabilit
Changing the mindset of a business as it relates to their Credit Policy and accounts receivables from Terms to NOW has a dramatic impact on the bottom-line profitability.
Why be the bank for your customers? Protecting the targeted Profit Margin for a business is critical for its survival, success, and growth.
Look at the unique benefits we offer to all of our customers:
Accelerated Cash Flow
Resuced Bad Debts/write-offs
Optimized Efficiencies
Improved Profitability
Mitigated Risks
Earned Trust And Reputation
From creating and sending out invoices, collections, posting of payments, receiving checks in the mail, to identifying credit risk customers, reconciliations, refunds and all payment acceptance media, all require the right processes that need to be reviewed and completely overhauled
These processes also have associated costs – whether they are hard costs (directly related to the process) or soft costs (indirectly related to the process).
You can leverage technology to limit associated costs. Payment methods have evolved over the years with the advent of Fintech industries that make payments seamless, reliable, cheaper, and effective.
In reviewing your Credit Policy with regards to these functions and processes, there are certain salient questions that you have to answer.
Your Credit Policy is fundamental to the growth of your business and it’s also a means of survival in the competitive market. It can influence your accounts receivables and can impact the profitability of your business or company.
However, if your Credit Policy is not functioning optimally, this goal won’t be achieved, hence a total analysis and review of your Credit Policy using the Credit Policy Calculator.
What this tool does is to help you analyze your current process – remember the functions and processes stated earlier, which are inherent parts of your Credit Policy. It also helps you determine your true costs (hard or soft) in your accounts receivables.
Compare the cost of credit and checks.
Review the impact of your Credit Policy on the profitability of your business.
Show you how an optimal Credit Policy can impact costs.
Help you discover the overall costs of the payment methods you are using.
Can help determine policies for your company
In the end, the primary goal is to see that your Credit Policy is efficient enough to impact your accounts receivables and in turn, lead to increased profitability.
The Credit Policy Calculator runs an analysis on any Credit Policy. The analysis involves gathering information on the current accounts receivables process.
After the information has been entered into the Credit Policy Calculator successfully, results will be displayed based on the information obtained.
If you are not leveraging technology in the payment processes of your Credit Policy, then you are leaving money on the table.
Consequently, the ultimate formula here is:
Credit Policy + Technology = Improved Profitability.
If you are trying to get a hang of the entire concept of infusing technology into your Credit Policy for maximum profit, don’t sweat it. We have an excellent payment gateway available to help you achieve this seamlessly.
This payment gateway isn’t going to affect your existing accounting process but will streamline it for effectiveness and sustainable positive outputs.
Robust API that integrates with existing accounting systems.
Level II & Level III data included with credit card transactions resulting in lower interchange costs.
Online reporting portal.
Installment Billing
Streamline invoice processes.
Customized Click to Pay Button.
Recurring Billing.
Capable of handling all Payment Acceptance Methods (Email, invoices, in-person, online, and phoned-in payments)
Reviewing the existing Credit Policy is critical for a business’ success.
Utilizing the Credit Policy Calculator assists with the review of existing functions and processes, performs an in-depth analysis, and shows how updating your Credit Policy can be streamlined to help you achieve your goals
But most importantly, calculates the impact on the enhanced profitability your business can realize
