7 credit control enhancements that will benefit your business

Sep 30 2019 Financial Management

Without a timely and consistent inflow of money, businesses can be significantly and adversely impacted. This can put huge pressure on even the most successful of businesses which may result in senior management time having to be spent focusing on non-value-adding areas. 

With an effective credit control procedure in place, the threat of late payment can be significantly reduced. 

Whilst this is obvious, many companies can do simple things to highly improve their credit control

To help improve your cash flow from keeping you up at night, take a look at these 7 credit control techniques that can benefit your business. 

1) Strategic Approach 

Many of the critical credit control failures can be avoided with one key thing – preparation. 

The same can be said for your credit control procedure; by failing to prepare you are preparing to fail. 

So, set out a credit control strategy and make sure you train staff appropriately and ensure they’re all on board so that all stages are adequately completed and meticulously adhered to. Ask yourself “What’s the worst that could happen?”, and make sure you know the answer and have plans in place for all situations. Make sure the cash collection approach is rigid and strictly adhered to, with proactive controls. If a customer knows you are going to chase they are less likely to default. 

2) Get to know your customers 

Some customers are capable of convincing business owners that they’re good to extend credit too, however, they are intentionally or otherwise using your business to help finance their own. Whilst on the surface they may seem like they can and will pay, the reality could be entirely different. 

To ensure that you only trade with customers who will pay you, you should get to know them and their payment habits before offering generous credit terms. This can be achieved by credit reports, account opening forms, online searches and slowly building up trust with them. After all, a bank is hardly going to give you thousands of pounds without knowing you and understanding your business prospects and risks, so why should you? 



3) Improving your payment terms 

There are lots of ways you can tackle late customer payments. But one of the most overlooked tools is the layout and content included on a business’s invoice. An efficient and cleverly designed invoice can improve cash collection considerably, whilst errors on an invoice could lead to disputes on payment and be costly for your business. Make it very clear what your payment terms are and how a customer is expected to pay. Make it clear there is a consequence, in the form of an admin fee and/or interest charge for not meeting terms, and apply it. 

Likewise, your terms and conditions are also a major component of protecting your business. With effective T&C's you can safeguard your business by setting expectations early on. This can limit disputes and reduce the chances of any potential surprises in the future. Plus, in the event something does go wrong, your T&Cs can be used as evidence in legal proceedings if needed. If applicable, ensure the title to the goods does not pass to the customer until payment has been fully settled. 

4) Don’t let your customers rule 

Some companies use their position to take advantage of other businesses. Supply-chain “bullying” should not be tolerated, but some businesses, particularly SMEs, feel like they have no choice and simply accept poor payment practices from large customers. 

It’s important not to let the fear of losing a customer deter you from taking action, whether you choose to take a firmer stance during your credit control calls or approach an outsourced credit control operation to play the “bad cop” role. Remember that by not paying you on time, that customer is putting your cash flow and business at risk. With these customers, setting the T&Cs in your favour is important and will pay dividends downstream.

 5) Remain firm but fair 

When your customers are behaving badly it can be frustrating and upsetting, but when it comes to credit control, you always need to be firm but fair and remain professional. 

Being overly aggressive is pointless could damage your company’s brand, and could have an impact if the situation ever ended up in court. The important thing is to set the right tone and then remain consistent in your efforts to achieve the best results. Furthermore, don’t be tempted to apply strong credit control processes for a short period and then slacken off, as you’ll lose many of the benefits. 

6) Confront your problems 

When it comes to dealing with late payments and the associated cash flow problems you can run, but you can’t hide. Without that money coming in, your cash flow will suffer, and your business may not be able to meet all its commitments. 

Statistically, the longer you leave it, the less likely you are to get paid, meaning it’s vital that you act quickly in order to resolve the issue. As soon as an invoice goes overdue, start the process to get back what you’re owed. If tackling such problems is something that you do not enjoy doing, make sure someone else does it for you. 

7) Seek an outsourced advisor 

Maintaining an efficient credit control strategy can be challenging and time-consuming, especially with the added time and stress it takes to chase late payments. It is also useful to deploy someone who is emotionally disengaged from the customer and the issue. 

If you’re spending lots of time on overdue invoices to the detriment of newer items on your sales ledger, it could be time to call in help. By utilising the services of an outsourced credit controller, you could improve your cash flow and regain the time to focus on more positive aspects of your business. 

As your business grows, it may be beneficial to have trusted financial professionals managing your credit control and providing strategic financial advice, especially if hiring a full-time specialist is too costly. 

Talk to EFM 

Our part-time and outsourced expertise will be tailored to the requirements of the business owner and may well only be for a handful of hours per month, but our team of experienced accountants will support you, saving your company time and money. 

If you’re a business owner seeking a fresh set of eyes to assess your accounts or conduct your credit control, the EFM team is here to help. 

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