Credit risk management is an important element of the proper company’s operations. The process can be shown as a series of four phases:
MONITORING: Monitoring of current risks (receivables)
Monitoring receivables are supervising the operation of receivables in order to minimize delays in the payments from contractors. This is essential in the activities of any company, because it allows you to track down even a few days’ delay. All the tools used for monitoring of the receivables are aimed, at a gentle way, to inform the contractor about the upcoming payment date. Typically, that includes a payment reminder, bank account number, which is to be paid and possibly, in the case of objections, the request for contact.
The most common ways to monitor the credit risk are phone calls to the customers, text messages, voice messages and payment demands. As the best practice, we can say that in fact the first step in credit risk monitoring is to establish a well-organized sales register, containing all information regarding transactions, payment terms, who and when has paid. What makes life easy here is a good technology integrating monitoring system with billing software.
The most important advantage of credit risk monitoring is endangered receivables control. As the basic goal of every entrepreneurship is to maintain the cash liquidity, it is so important to collect the receivables on time. In most of the cases the reasons for delay are very infantile, it is not reasoned by customer’s nastiness. Thus, simple e-mail message with a list of invoices which are going to be due soon – works very well.
Trade receivables monitoring is also a very good tool to keep a discipline among your customers’ portfolio. it shows how professional and firm your credit management team is: the agreement on your side has been fulfilled – now it is time to pay for that. It is simple but sometimes forgotten in the discussion with the customer. Regular reminders make your customer more disciplined about payments to your company. Just that.
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