Whether you are a new business owner, or one who has been running a business for years, one of the challenges you can expect to face in the coming year are slow-paying and non-paying clients. As part of your effective business management strategy, consider the following suggestions for minimizing slow pays and credit defaults in the receivables department.
1. Have and use a credit assessment model. Many businesses – especially new businesses – are so eager to close the sale that they neglect to determine whether the customer is credit-worthy. Landing a sale is not worth your time if the customer ends up defaulting on your payment agreement.
2. Periodically review your credit assessment tools. Do a little research annually to see whether new techniques or emerging technology can help your business further minimize credit risks. To help you decide whether to invest in newer credit assessment technology, take a look at last year’s bad debt. If an upgrade costs less than last year’s bad debt, then the upgrade is probably worth the money.
3. Periodically review your sales contracts and payment agreements. For companies who use form contracts with every sale, have an experienced business law attorney review your contract to identify areas where the contract could be improved to give you better collection leverage in the event of customer default. At a minimum, your contracts should clearly state the terms of the sale, expected payment amounts, interest, and due dates, penalties for noncompliance, and potential default terms and methods of recourse in case of default.
For assistance drafting or reviewing your sales contracts or payment agreements, or for help with any other matter related to your business, call Scolieri Law Group, P.C. Located in western Pennsylvania, our attorneys are experienced in Pennsylvania business law and can help you navigate contracts, credit risk, and other matters affecting your business. Contact us today at (412)765-0546 or email@example.com.