| Credit and Collections is a key function performed | | | | account. |
| or supervised by the owner in a small business. It | | | | Follow-up should begin with confirming receipt of |
| provides more business than possible otherwise, | | | | the invoice. Then at regular intervals +30, +60 |
| but it also creates a significant level of financial | | | | and +90 the follow-up process should be routine |
| risk. Familiarity with the credit terms of one's | | | | and worded to reflect the seriousness of the time |
| industry and the typical bad debt experience in | | | | past due. At an appropriate point the account |
| that industry is important to know. A bad debt | | | | should be suspended until payment is received and |
| experience of 1% of sales is considered a cost of | | | | the account is back to within terms. At the 90 |
| doing business in some industries. | | | | day point a letter should go out notifying the |
| The credit, collection function should be organized | | | | customer that if payment is not received |
| with written policies and procedures concerning: | | | | promptly the account will be forwarded to an |
| credit application, checking credit, granting credit, | | | | attorney. |
| following up credit granted and collections. | | | | Bad checks can be filed on in the Justice of the |
| Applications should be based on industry standard | | | | Peace office in the State, County and Precinct |
| forms with at least three commercial references. | | | | where it was passed. Checks should be marked |
| Local credit agencies and possibly national agencies | | | | NSF or account closed. Stop payments have to |
| should be joined to provide the best possible basis | | | | be filed on in civil court. Each NSF check should be |
| for the credit granting decision. Credit limits should | | | | accompanied with proof that it was mailed as |
| be established based on the time in business, the | | | | certified in an attempt to collect the debt before |
| legal form of the business entity, their credit | | | | it can be filed on in court. Account closed checks |
| history, financial stability based on financial reports | | | | can be filed without the proof of certified mail. An |
| and the volume of business. Sole-Proprietors | | | | affidavit must be completed, signed and notarized. |
| should be asked to sign a personal guarantee. You | | | | The original returned check, proof of certified mail |
| would start with a smaller number and based on | | | | and the affidavit must be submitted together. |
| the applicants payment history increase the limit | | | | These actions will not guarantee payment, but |
| as general economic conditions allow and their | | | | they will eliminate any surprises that could have |
| payment history justifies. Credit should be | | | | been foreseen if due diligence was exercised. |
| monitored regularly based on an aging of the | | | | |