Archive for February, 2021

Small Business Credit and Collections

February 6th, 2021

Credit and Collections is a key function performed or supervised by the owner in a small business. It provides more business than possible otherwise, but it also creates a significant level of financial risk. Familiarity with the credit terms of one’s industry and the typical bad debt experience in that industry is important to know. A bad debt experience of 1% of sales is considered a cost of doing business in some industries.

The credit, collection function should be organized with written policies and procedures concerning: credit application, checking credit, granting credit, following up credit granted and collections. Applications should be based on industry standard forms with at least three commercial references. Local credit agencies and possibly national agencies should be joined to provide the best possible basis for the credit granting decision. Credit limits should be established based on the time in business, the legal form of the business entity, their credit history, financial stability based on financial reports and the volume of business. Sole-Proprietors should be asked to sign a personal guarantee. You would start with a smaller number and based on the applicants payment history increase the limit as general economic conditions allow and their payment history justifies. Credit should be monitored regularly based on an aging of the account.

Follow-up should begin with confirming receipt of the invoice. Then at regular intervals +30, +60 and +90 the follow-up process should be routine and worded to reflect the seriousness of the time past due. At an appropriate point the account should be suspended until payment is received and the account is back to within terms. At the 90 day point a letter should go out notifying the customer that if payment is not received promptly the account will be forwarded to an attorney.

Bad checks can be filed on in the Justice of the Peace office in the State, County and Precinct where it was passed. Checks should be marked NSF or account closed. Stop payments have to be filed on in civil court. Each NSF check should be accompanied with proof that it was mailed as certified in an attempt to collect the debt before it can be filed on in court. Account closed checks can be filed without the proof of certified mail. An affidavit must be completed, signed and notarized. The original returned check, proof of certified mail and the affidavit must be submitted together.

These actions will not guarantee payment, but they will eliminate any surprises that could have been foreseen if due diligence was exercised.

Allan Lindquist is an Accountant with 30 years experience in various positions up to and including VP Accounting Manager and Treasurer/Controller with Profit and Non Profit Organizations. He brings unique insight, clear instructions, and over twenty-five years of experience to all of his Accounting articles. Owner of Lindquist & Associates, Allan’s clients enjoy these same ben

Improve Your Credit With Free Credit And Collections Management Tutorials

February 6th, 2021

Have you ever wondered just how important your credit score is to your financial decision making process? When you consider that your score will determine whether you will get that new car or house that you have had your eye on for some time it’s no wonder many people share the same thoughts. The fact is , that even small credit problems can cause you to be turned down for a loan now and a few years later. It is important for you to know what your credit score is, and if it’s not very high then you need to learn how to improve it.

There are a lot of things that can negatively affect your credit: unpaid credit card bills, and even an unpaid traffic fine can give you a negative mark at the credit bureau. A short list of other things that could hold your credit back would be: having a loan go into default, having a loan being sent to collections, filing for bankruptcy, home foreclosure, and maxing out your credit cards.

Ignoring your credit card bills, or not paying your bills at all, is probably the worst thing you can do to your credit score and this is one reason you need credit and collections management tutorials. A late payment is much better than no payment at all. Lenders are looking for people who have a history of paying their financial obligations.

If you’re getting annoying phone calls from third party collectors then this is probably not the right time for applying for credit. When a debt is in the hands of a collection agency, it means that the original lender has given up collecting payment from you and decided to hire someone to do it for them. These days home foreclosure has become a big problem.

Many lenders are sympathetic to having problems of making your mortgage payments or having your home in foreclosure; however, this does not mean that you will have an easy time getting another mortgage loan. Instead of filing for bankruptcy, or going through a home foreclosure, you might try to see a consumer credit counsellor and get these management tutorials to help you.

If your credit is poor, don’t give up. Instead go see your lender and ask them to help you make a plan to improve your credit score. Many people who have a very poor credit rating have been helped to the point of obtaining loans and mortgage much faster than they ever thought possible just by making a credit repair plan with their lender.

Some people who have been turned down have found that their score was just below the limit and were able to make very small changes to obtain a loan by getting credit and collections management tutorials.