Improve credit management

Extending credit to your customers can be risky, but often it would be impractical not to offer credit. If customer expectations or the nature of your business compel you to sell on credit, you need to manage the risks. This step-by-step guide shows you how to use QuickBooks data to establish and maintain a strong credit program and ensure that you collect what you’re owed.

Customers who pay late (or not at all) cost you money by crimping your cash flow and directing your time towards collections rather than making more sales. Ideally, the cost of uncollectable bills should not be a significant cost of doing business.

According to the American Collectors Association, bad debt should amount to no more than 5% of your gross profit—sometimes even less, depending on your type of business. To keep your losses to a minimum and speed up the collection process, you need to take the following actions:

• extend credit sensibly
• keep an eye on your accounts receivable
• collect overdue bills promptly

Increases in the availability of credit are making it easier and easier for many people to get into debt over their heads. In 1998, one in twelve Americans filed for bankruptcy, and consumer debt is still on the rise. In some industries, small business debt is as high as 70% of net worth. Now more than ever it is important to protect your business from the costs of late and unpaid bills.