Many small and medium enterprises in Kenya extend credit to customers without a formal policy. This leads to inconsistent payment terms, delayed collections, and ultimately, bad debts that threaten the business.
Mistake 1: No written credit terms. Verbal agreements are hard to enforce. Every customer should sign off on payment terms before goods or services are delivered.
Mistake 2: Ignoring credit checks. Before extending credit, verify the customer's payment history, business registration, and financial standing. A simple reference check can save you months of chasing.
Mistake 3: Waiting too long to follow up. The best time to follow up on an overdue invoice is the day after the due date — not 90 days later.
Mistake 4: No escalation process. Define what happens at 7 days, 30 days, and 60 days overdue. Who makes the call? When do you involve a collection agency?
Mistake 5: Mixing personal and business relationships with credit decisions. Friends and family accounts often become the worst-performing debts because there is no professional distance.
Faways Solutions helps SMEs design and implement credit policies that protect cash flow while maintaining customer relationships. Book a consultation to get started.