If you extend credit to your customers you need to have a credit policy. A credit policy sets the, “guidelines that spell out how to decide which customers are sold on open account, the exact payment terms, the limits set on outstanding balances and how to deal with delinquent accounts.” (from www.entrepreneur.com)
Once established, you need to stick to it. Having a credit policy that is not enforced is useless.
An integrated ERP system is essential to staying on top of your accounts receivable and executing your credit policy.
These are some of the features of an integrated ERP system that will help you enforce your credit policy and protect your business:
- Ensure that sales of items and services to your customers are accurately recorded on a timely basis. Sales need to be accurately recorded to reduce or eliminate billing disagreements with your customers. Sales need to be recorded on a timely basis so that payment terms based on document date can begin as early as possible.
- Provide a continuously updated listing of accounts outstanding so that credit managers and others are fully informed about the business’s investment in accounts receivable.
- Provide business alerts to notify credit managers and others when specific accounts are violating your credit policy so that corrective actions can be taken immediately.
The professional services industry has significant challenges in these areas. Often time, businesses in this industry invoice their customers for time spent by their employees to deliver services for their customers. Getting employees to record time on a timely basis and having the time properly reviewed and approved can be problematic. And then getting all the recorded time priced properly and included on customers’ invoices can also be a long and tortuous process.
An integrated ERP system that allows for time entry and flexible invoicing processes will help you stay on top of your credit policy.