Trevor Cole Commercial Corp is a commercial structured finance company based in New York. Committed to offering a full range of services, Trevor Cole Commercial Corp advises clients on balance sheet assets and accounts receivables.
Accounts receivable management involves three things: assessment of the creditworthiness of potential customers, setting of suitable credit terms, and setting up efficient cash collection systems. This article will focus on the first two.
Before extending credit to a customer, a business owner must ensure the customer is indeed creditworthy. There are a number of ways to verify this. The first is a bank reference. Ask the customer’s bank to give a statement of fact on the customer’s creditworthiness. Another way is by asking another company that deals with the potential customer for a statement on creditworthiness. A credit reference bureau could give more detailed information on a customer’s credit history. If the customer is a company, check its most recent financial statements to get an idea of its total assets, loan book, and annual revenue.
If the customer is credit worthy and you give the person or entity credit, ensure the terms of the credit are clearly defined. This includes details such as the repayment period, discounts for early payment, the interest charged for late payment, and consequences of default. It is wise to have a credit limit for each customer. Do not give credit past this limit until a trustworthy relationship is established between the two of you.