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It is important for any business to optimise working capital and minimise credit risks. Credit management ensures that these goals are achievable and gives you every opportunity to build on the success of your business. However, maintaining tight credit management is time-consuming and, on top of that, the risk of default by debtors remains. Credit management more specifically includes components such as debt collection, credit information and communication, in addition to debtor management.

Why is credit management important?

Outstanding invoices play an important role in credit management. This is where many entrepreneurs get stuck, because with outstanding invoices, working capital is only available in the future, with all the uncertainty that implies. It is therefore important to identify and test the credit risk of debtors, but also to get outstanding invoices paid on time. By doing so, the debtor balance can be reduced and this improves working capital.

Advantages of credit management

Every company needs healthy working capital to continue to grow and to meet its own payment obligations. Credit management offers several advantages in that respect, such as a higher liquidity position due to the lower debtor balance as well as insight into debtor risks. Moreover, credit management provides for maintaining good customer relations.
Insight into outstanding invoices
In credit management, it is important to have insight into the outstanding debtor balance, among other things. Or more specifically on the average term of payment, to which the term Days Sales Outstanding, abbreviated to DSO, applies. Typically, debtors pay within the specified invoice payment period, but not every payment arrives at the same time. It also happens that payment falls outside the payment term or that you have to send multiple reminders and a final reminder. Unfortunately, it happens too often that invoices are forgotten, and you don’t get the money you are entitled to until much later or not at all.

Improve credit management

There are of course several ways to improve credit management and get invoices paid on time to optimise cash flow. This can be done by strictly monitoring payment deadlines and contacting debtors if they do not pay on time. As a company, you have an interest in ensuring that the DSO is short to promote healthy cash flow. It helps then to use an automated accounts receivable system, for instance. However, this does not immediately guarantee timely payment and also lacks the certainty of increasing liquidity. There is another solution for this within credit management, namely by choosing factoring and getting your invoices paid within 24 hours.

Credit management: certainty with selling invoices

When outsourcing credit management for better cash flow, you have the option of selling the invoices to Factris. With this form of credit management outsourcing, you take a big step towards creating a perfect cash flow position. After selling your invoices, you will receive the invoice value minus a small fee charged by Factris within 24 hours.
This way, you no longer have to worry about collecting invoices, and you also limit the debtor risk. You also get certainty about cash flow, with the invoice amounts being available for your business in the very short term.

Factoring as part of successful credit management

Factoring provides perfect support for credit management, while taking debtor management out of your hands. By doing so, you immediately strengthen your company’s cash flow position already, and in that respect, this part of credit management outsourcing is a successful choice. It is not for nothing that many small and medium-sized companies choose SME factoring and thus outsource the most important part of credit management. We even take this a step further by offering comprehensive service and personal support.

Credit management with factoring service at Factris

With Factris, you benefit from many advantages when it comes to credit management with factoring your invoices. You get instant access to more working capital and don’t have to worry about collecting receivables. We take care of that. For example, our service also provides financial security with credit insurance, and we monitor buyers. With us, you get your own account manager who offers personal support, and you benefit from our one-stop platform for uploading invoices. We also determine in consultation with you how your customers are dealt with. When it comes to credit management communication, there is therefore a professional approach.

This article has been revised by

Edmundas Volskis

Edmundas Volskis

Chief Risk Officer

Edmundas Volkis is a vital organization member responsible for identifying, assessing, and mitigating risks that could impact the company’s goals. In 2015, he was the first employee at Factris, besides the managing director.
Edmundas previously worked in data analysis and business consulting. The CRO deeply understands the organization’s business model, operations, risk appetite, and current and emerging risks that could affect the company.
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