An easy way to reduce the level of outstanding debt is by setting a credit limit. If you provide credit for your customers, make proper use of the information you have already obtained about them from the credit report. By using this information you should be able to establish and set a credit limit that is appropriate for each customer on an individual basis.
If the customer is new, setting a lower limit initially is sensible. This limit can be reviewed on an ongoing basis as the business relationship continues and you have built up trust and confidence in the customer’s ability and willingness to repay.
If you have any doubts about whether the customer will pay then do not offer a credit facility. We appreciate that not offering this facility may not always be practical for your business; but there is always the alternative option of obtaining security for the credit that you offer, by way of a personal guarantee from a director of a limited company.
If you have any questions or if you’re unsure what credit limits are reasonable to set when forming new relationships, our team will help – contact us today on 01228 713070.
Posted: August 5th, 2014