Your Credit Policy is an Asset to your Business

Your business has many assets, such as physical items, maybe your building, equipment, items you stock, key employees, your customers and your credit functions. Many business owners don’t look at their credit functions as an asset, but your credit functions are one of the most important assets your business has. Assets are economic resources owned by a business. Anything tangible or intangible that your business owns is an asset, assets are things of value that can be easily converted into cash and cash is considered an asset.

Your credit functions should be involved in the segmentation, targeting and positioning of your business. Ask yourself, what is the objective of my business and is my credit policy in line with those objectives or with corporate objectives? Segmenting, targeting and positioning help your business to know your customers better and focus on those customers needs in your target market resulting in long-term customer relationships and therefore more sales at less cost.

Your credit policy is the backbone of your finances, without money you cannot continue to stay in business or grow your business. The credit policies you have for your company should be integrated with your sales department and distribution so that you can all be on the same page and provide outstanding customer service. When these things are in line with each other everything runs much more smoothly, and your customer can see that. When your credit department is run correctly and efficiently it helps you to maintain long-term customer relationships by ensuring repeat profitable sales and minimizes your costs. Having the lines of communication open between credit and sales will go a long way in your success, make sure to have regular meetings with the sales and credit departments and help them find ways that they can work together to make each others jobs easier. This will be reflected in your bottom line. These meetings can help you in many ways, it can help your sales people to learn the skills they need in order to gather key information that the credit department needs in order to make informed decisions. The credit department can also be “trained” to know what the sales people deal with and how they can help them to make a sale while limiting your businesses credit risk.

As you take these steps to improve your business, be sure to reward your sales and credit people, this helps them to stay motivated and strive towards doing even better, which can only benefit you and your business. If you do nothing else to increase sales try merging your credit and sales department and you will see a vast improvement in your receivables, bad debt and employee morale.