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Nearly
every biz operation is exposed to credit risks, especially when it involves
extending credit to its customers, be they corporate organizations or
individual buyers.
How
much credit limit and credit period offered depends on careful credit
assessment by the suppliers or funders. If credit is too tight, sales
are lost but if credit is too loose, the whole organization's cashflow may
suffer.
In
short, what credit managers try to achieve is to minimize and prevent
bad debtors while maximizing sales for the company.
Even though
you may have a good credit control system, problems always arise over the
issue of debt collection and debt
recovery, particularly the long overdue debts. Very often, such problems
have led to unnecessary time consuming and cumbersome task of litigation, as
well as legal proceedings to recover bad debts.
In
many cases, the chances of recovering the actual sums due have been so
considerably reduced due to the inability of the debtors to pay what is
expected of them and that the entire legal battle has become a dreadful
waste of time, money and effort.
All
these can be easily avoided if these business operations are wisely
conducted on the basis of a sound credit policy with proper
credit assessment of new clients as well as existing clients.
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