Benefits of Using a Credit Management Software
Credit management is an extremely important aspect of a business, which has an impact on the business's cash flow and liquidity. Bad management of credit can even result in bankruptcy. Using a software and automating the processes to manage credit can ease your work greatly. Let us understand the benefits of using a credit management software.
a. Tracking bills with payments
A hugely time-consuming activity in credit management is to keep a track of your bills and payments made in respect of these bills. This becomes even more complicated when multiple payments, advance payments and lumpsum payments made against multiple bills come into the picture. Once this kind of tracking is done, you also need to arrive at the pending amounts with their respective due dates. Managing all this manually can take significant time and effort and be prone to errors. A software for credit management will help you automate all this tracking. You also get a view of your pending receivables and payables instantly based on the bills tracked.
b. Defining credit limits
Credit limit is an integral aspect of credit management. Credit limit is the maximum amount of credit that you want to extend to a customer. You need to define the credit limits for each customer and keep a track of whether these credit limits are being crossed. A credit management software will help you define these credit limits easily. It will also alert you when the defined credit limit gets exceeded.
c. Defining credit period
Credit period is the number of days of credit that you decide to extend to each of your customers and that your suppliers have extended to you. The due dates of bills are extremely important to track, to ensure that your customers pay on time and you pay your suppliers on time. A credit management software gives you the ability to define the credit period for each customer & supplier. It also tracks the due date of each bill and alerts you when the due date is missed.
d. Send payment reminder letters
When a customer misses the due date for payment, it is important to immediately realize that it is missed and send a reminder letter. Sending such payment reminders on time manually can delay the process and would require lot of time and effort. A credit management software will help you send payment reminders to all your customers who have missed payments at one shot. Further, the reminder letter will capture the exact details of the bills which are pending and the amount. You can easily choose to print and give these letters physically to your customers or even send them to their email address.
e. Real-time credit reports
When you manage credit manually, keeping tracking of bills, ensuring payments are made on time, ensuring credit limits are met, etc. are very time consuming and become a burden. Using a software can help you get a real-time view on pending bills, overdue bills, customer or supplier-wise report of pending bills, etc. All these will ensure that you are always updated on your credit status and get the necessary alerts at the right time. You also don’t need to do anything additional to prepare these reports. Based on your invoices, these reports are made available to you instantly.
Hence, credit management requires certain activities to be performed, to ensure that the business runs on optimum credit. Automating these activities has become a necessity, to ensure that you can save time and effort required to perform these tasks manually. It is important to select an accounting software that has the features discussed in this article, to enable you to automate majority of your credit management tasks.
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