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March’s Credit Management FAQ

credit management faq

Here are our top credit management FAQ for March.

What is credit risk assessment?

Credit risk assessment should be carried out prior to entering into a contract and providing any goods or services to a prospective customer. The aim of this assessment is to identify the risk that your prospective customers poses to your business, i.e. are there any adverse indicators that would suggest your potential customer will delay payment, or not pay at all. View our blog on credit checking customers for more information.

What should I do when planning a collection call?

You should always re-equant yourself with the relevant facts of an account before making the call, including: disputes, previous contact, current outstanding transactions and payment history. Having detailed notes that are accessible by other relevant colleagues is useful for you to be more effective; to relevant colleagues so they know the status of the account when discussing other issues with your customer such as new orders, and it also enables you to comply with Court’s pre action protocols, should you need to take court action.

Have you got any advice on how to put a customer on hold?

You firstly need to ensure that you have reserved the right to use a credit hold facility for late payment in your Terms and Conditions, without this you could be in breach of contract. Prior to putting your customer on credit hold, it may be appropriate to send them a 7 day notice of credit hold letter, this gives your customer the opportunity settle the account without any disruption and is a more customer focused approach to maintain your customer relationship.

What is confidential invoice finance (CID)?

Confidential invoice finance, like factoring, allows you to draw down a percentage of an invoice (typically 80%) as soon as the invoice is posted, rather than waiting for your customer to pay. If you do not receive payment with 90 days, the 80% advanced funds will be taken back. When the invoice is paid by your customer, you will receive the remaining 20% balance. Where confidential invoice finance differs from factoring is that your customers will not know that you receive invoice finance, the charges are usually less than factoring and, unlike factoring, the advance for an invoice that is disputed won’t be removed from your availability as soon as the dispute is known. Enabling you to resolve the dispute and receive payment within the 90 days as you are responsible for chasing payment. As CID is a higher risk to the finance company that factoring, your credit management systems and process needs to be extremely efficient and robust.

Contact us today to find out how we can help you to achieve this.