Questions & Answers
Creditors’ Rights 35
Q: I have a responsible credit policy for my company and have solid relationships with all my customers. What else can The Get P.A.I.D.® System help me accomplish?
A: A responsible and disciplined credit policy achieves two important goals: getting compensated for what you do and enhancing the relationship with your customers/clients, both important. There are some additional benefits to The System. The Get P.A.I.D.® System underscores the importance of Preparation, Assessment, Implementation and Defense and the costs of not observing them. Implied in the benefits of a well managed credit policy is a strong cautionary imperative: the hard costs of easy credit, including finance cost, opportunity cost, collection cost, relationship and marketing costs. Easy credit can undermine all the important goals of a business.
- Loss of Revenue. Revenue is a time based exercize. Receivables aren’t revenue. A product or service isn’t technically sold until it’s paid for.
- Loss of Profit. When collection costs are incurred, profit declines. As the charts on the previous page represent, the cost of collection increases dramatically for each month a receivable remains uncollected. By the time you clocked 120 days, you’ve spent 40% of your total revenue just to collect it.
- Loss of Goodwill. Goodwill from providing easy credit becomes quickly eroded as soon as you start getting aggressive. There’s nothing like penalty charges, collection letters and lawyers for building the kind of relationship that often ends in no relationship at all.
*Learn more about credit policies and the Payment Gap with Bob Bernstein’s new book, Get P.A.I.D.TM A Guide to Getting Paid Faster (and What to Do if You Don’t!) at www.getpaidsystem.com
