Poor debt management can indeed stain a company’s business credit. However, there are ways on how to repair these debt problems and eventually repair the affected business credit. Debt mismanagement can sometimes be unavoidable, especially if the issue has already gotten out of hand. However, there are still preventative measures in order to avoid such things accruing in the future.

- First thing to do is to estimate the gravity of the whole situation. Think what could be causing the problem to worsen. Then, try to work on the cause or causes if you can. If you feel that it is something you cannot control, you can seek professional assistance from your accountant or a credit counselor that can offer you helpful advice in dealing with it.

- Check on the inventory control. This reflects your business’ cash. Learn how much inventory you need to stock according to your company’s needs instead of having them pile up and not converted into revenue. If this is not converted, the business will lose a lot of money due to slow-moving or unproductive inventory.

- Focus on settlement of receivables. Indicate due dates on your invoice on every transaction to instill urgency on customers. You can also encourage them in making prompt payments by setting incentives to early payers. Make it a point that you send notices on late payments.

- Take time to review your business credit policies as well as your customers’ credit histories. It is important for you to manage your customers’ credit because it greatly affects your cash flow management. Categorize your customers if you need to. Sort the profitable and unprofitable customers. You can also label those who keep a history of late or slow payments. It may not hurt that much for your business to lose customers, especially if the customers you will be losing are unprofitable or delinquent customers. It is also advisable to run a credit check on each customer before you extend any credit or maybe you can also modify the credit terms you granted.

There are many ways you can protect your business credit and controlling debt or proper debt management is one of these. The focus of each business is to earn revenue and profit to get back the capital you have invested on it. Learning proper debt management skills is very helpful in strategizing your business cash flow.

This is a guest article by Tony Allen. Tony is experts at helping small businesses build business credit and writes extensively about business fundability.   

Business Credit, General