Your credit policy should look different in 2023
A good credit policy is essential - Over the past decades, an increasing number of companies have formalized frameworks and processes when it comes to their credit policy, and that's a good thing! Credit, payment terms and debtor management are more important than ever. At Collectia, we believe that 2023 is the year when, without a strong credit policy, businesses could be hit hard.
An effective credit policy is essential for businesses, especially in times of economic pressure, as it helps to ensure that the business has the necessary liquidity to maintain its operations and survive in a difficult economic situation. The credit policy helps limit the company's financial risk by ensuring that they only issue credit to customers who have a history of paying back on time and that their ability to pay is assessed on a regular basis. This can help reduce the company's bad debt, which can have a negative impact on its financial health. It can also help maintain a good credit rating, which is crucial to a company's ability to access finance for future projects and investments. It can also have a positive impact on a company's reputation and make it easier to attract customers and business partners.
2023 looks set to be an exciting year - not just for the stock market, housing market or interest rate market. We expect more companies to see the need to strengthen their credit policy to avoid increased bad debt losses and reduce the number of debt collection cases.
We focus on credit policy in this post and why we think it should look different in 2023.
If your company already has a credit policy in place, this post can inspire you to update it. If your business does not yet have a formal credit policy, this post can provide you with inspiration to develop one.
Credit policy - what is it?
'Credit policy' is basically what the word so nicely describes it; a policy for your credit management. It is a formal set of rules that determines how much and to whom the company wants to extend credit.
The credit policy can be the same for all customers, or it can take a more sophisticated form, with some customers having a larger amount of credit than others. There are no hard and fast rules on what a credit policy should contain and some businesses have none, while others have several.
How do I get started with a credit policy?
We have previously discussed and written on the topic of "credit policy", as well as written a guide on how to start, develop and optimize your credit policy. We strongly recommend that you read it.
Credit policy - how to design and apply an effective credit policy in your business
Do you have challenges with bad payers from time to time? Do you find that your customers often pay late or don't pay at all? Whether you experience bad payers or not, an effective credit policy is the key to protecting yourself from bad payers, no matter the size of your business. By doing so, you'll ensure a...
Why do we need to update our credit policy in 2023?
We recommend that you review and optimize your credit policies on a regular basis, and 2023 should not be an exception. We expect 2023 to be a challenging year for many businesses and individuals; the economy is under pressure, inflation is affecting household finances, and more businesses and individuals are going bankrupt. This increases the pressure on your credit policy and thus also on how you should approach your customers.
The natural step is to tighten your credit policy in times of uncertainty. But it may also be time to use other tools in your credit policy, rather than just limiting credit amounts and credit periods.
One example would be to implement a credit scoring tool that can segment your customers and provide recommendations on what credit policy each specific customer or customer segment should have.
Do you need help with your credit policy?
Collectia has a rich experience in the field of debt collection, debt recovery, credit assessment and credit policies, with over 150 years of history. We have combined our expertise with modern technologies and data to provide our customers with the best solutions.
We also offer a free demonstration of our credit rating platform, Qatchr, which allows you to effectively assess and segment your customers. By using Qatchr, you can minimize the risk of bad payers and thereby maintain the financial health of your company.
