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Businesses need effective credit policies

The structure of an effective credit policy was the central theme at a recent seminar held for the Latrobe Micro and Home Based Business Network.

By Latrobe Shire - 13th March 2003 - Back to News

Guest speaker at the seminar, Mark Answerth, stressed that credit is a privilege, not a right, and therefore all businesses should have a credit policy that ensures exposure to bad debts is limited to an acceptable and manageable level.

"Almost ten-percent of small business failures have been attributed to poor credit control," Mr Answerth said. "Businesses must see that giving credit is the same as giving out money, and therefore it must be retrieved in the most effective way."

Ways to maintain a good credit policy were discussed at the seminar, and businesses were instructed to obtain detailed credit applications, undertake satisfactory credit approval processes, monitor credits, have overdue collection policies and have a strategy to collect debts in order to have effective credit policies.

Mr Answerth said that steps must be taken to obtain an effective credit policy, otherwise a business must produce an increased turnover in order to cover the losses received from unrecoverable credit.

"The debt recovery rate declines every 30 days it remains outstanding," Mr Answerth said. "After 30 days the recovery rate falls quickly, and after 120 days there is a 60 percent or less chance of retrieving debt."

Latrobe City Investment Manager, Leo Billington, said that it is important that business owners know how to manage their credit policies effectively and seminars can help them do so.

"Seminars can offer lots of information that will help businesses thrive such as offering advice on credit policies," Mr Billington said. "Specialists such as Mark Answerth speak at most seminars, and in this case Mr Answerth’s advice taught a lot of people how to ensure fair and reasonable settlement of debt recovery.

"Businesses should not be afraid or embarrassed to seek help because there are always people and events that can help businesses to grow and prosper," Mr Billington added.

Latrobe City Mayor, Councillor Tony Hanning said that he also supports business seminars and agrees that the Latrobe Micro and Home Business Network seminar on credit policies was particularly important to all businesses in Latrobe City.

"Every business, small or large, will allow credit because it is an acceptable, wide-spread business practice. However, it is a privilege," Councillor Hanning said.

"A credit policy made known to customers and clients is a real advantage in these days of tighter profit margins, and therefore all businesses need to know how to use a credit policy efficiently," Cr Hanning explained.

Source: www.gippsland.com

Published by: support@gippslander.com

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