Transportation Factoring Costs


Good Credit Management  Recommendations &  Guidance About Collecting  Overdue Sales Invoices


The survival and prosperity of  each small, medium and large businesses is  contingent upon receipt of payment from customers in respect of the product and services that the business  offers and invoice for. It is not  good enough to secure the sales order and  supply the product if that sale can not be  transformed into cash.  Money is the  lifeline of every business and if debtors don’t pay outstanding invoices  in a timely manner it can  lead to  problems. See Transportation Factoring Costs


 Several businesses are  obliged to offer credit terms to customers in order to  stay  very competitive and win orders but this has a  bad effect upon their cash flow. The damage caused by non payment (bad debts) can also be  considerable, and the longer the period of credit that is offered the more  possibility there is for the customer’s circumstances to change, and  therefore payment to be  put off –  in many cases permanently. The secret to success is good credit management and credit control.


There are two  areas to  effective credit management. The first is taking care in choosing the businesses that you will  extend credit terms. The second is to  build and employ an effective system of credit control techniques to collect unpaid invoices.




The following  suggestions may be  valuable when  choosing  whether to offer credit terms to a customer:.


•  Regularly confirm the exact trading name of the customer e.g. XYZ Limited; XYZ Plc; Mr X and Mr Y trading as XYZ; or Mr X trading as XYZ. All of these are  distinctively  unique and  finding out the exact trading name  may be  crucial in pursing a customer for payment through the legal system, should the need arise. The customer’s headed stationery, business cards or brochures can  frequently be helpful in determining the exact name, although  always remember they  might be  wrong.


•  Provide the minimum credit period that will be competitively  appropriate. The longer the credit period the more chance there is that the customer’s financial  situations may change.


•  Ensure that that you have all the customer’s contact  particulars: addresses, phone numbers, fax numbers, mobile numbers, email addresses etc.  Ideally, take the contact details of the prime movers. These can be extremely helpful if you  have to  talk to the customer regarding unpaid invoices in the future.


• Trade references  could be  handy but most businesses will have at least a couple of customers that will  swear by them.


• Credit  facts about customers can be purchased from a  range of providers. This can give you  knowledge into the financial position of a business. You can also ask the customer to provide you with financial information about their business.


• If a considerable amount of credit will be at stake consider  paying a visit to the customer to  verify that the address given exists. A  pile of  data about a business can often be  acquired just by  going to their offices and noticing what is going on e.g. are they  swamped or is trade slack?


•  See to it that the customer has  checked out your terms of trade and has accepted the credit terms that you have agreed to offer.


•  Be sure you  learn the process for  sending your invoices and  getting payment from the customer e.g. who do you  give them to, when is their check run etc




The following  pointers and hints may be useful in  guaranteeing that you have an effective credit control process in place to collect unpaid sales invoices:.

•  Learn the customer’s payment process and procedures e.g. if you know the date that they  perform their monthly check run you can time your statement  as necessary.

•  Take into consideration “pre-dunning”, calling the customer before payment is due to confirm that your invoice has been received and that there are no reasons for non payment.

•  Start a systematic approach to  providing statements,  dispatching chasing letters (which gradually become firmer) and calling the customers.

• Keep copies of any correspondence and notes about telephone conversations.  Validate conversations in writing and  ideally  get the customer’s written  contract to any payment  vows.

• Try to call back and speak to the individuals concerned  in lieu of leaving messages on answer machines.

•  Think about other  techniques of  getting in touch with debtors e.g. text messages to mobile numbers or email and fax.

•  Make sure to remain calm but  self-assertive on the telephone.

•  Look into promptly on any broken promises of payment.

•  Minimize the process by emailing or faxing documents  as opposed to posting.

• If  required consider stopping further deliveries once invoices are overdue.


The field of credit management and credit control is  considerable and these are  just a few key points to  take into account.  A lot of businesses have staff in-house that undertake this  help them but there are alternatives.


Factoring companies  are experts in out-sourcing such services for their clients. They have specialist staff that can  carry out the collection of your sales  journal for you and  often this can be achieved with cost savings. The cost of  invoice factoring should be weighed against the cost of recruiting specialist staff or  dealing with the task yourself.


It is also possible to receive bad debt protection (also called non recourse) which can eliminate the need for you to worry about which customers are credit worthy. The factoring company will  look into the customers standing for you and they will grant a credit limit  for every customer. Also see Transportation Factoring Costs.