How to streamline your company’s credit control

Streamlining your business’s credit control helps you to manage cash flow and ensures that you have optimal working capital for your needs. Without this, you run the risk of enduring regular cash shortages, which could set in motion a steady financial decline.

Fortunately, simplifying your credit control minimises this risk and places your business on the right trajectory. You just need to be proactive in all areas where credit is used and vigilant for clients or customers who consistently pay late, writes Karl Hodson of UK Business Finance, a commercial finance expert.

Your sales ledger is a significant asset that can also allow you to borrow against your unpaid invoices. If you need to seek funding, operating a streamlined credit control function can make your business attractive to invoice financiers as they rely on the creditworthiness of your customers.

What does credit control involve?

Good credit control safeguards the cash in your business - in practical terms, it involves monitoring your customers’ credit limits and payments and being proactive in collecting debts.

This starts with credit checking new customers but also reviewing the credit limits of existing ones, as carrying out regular credit checks keeps you up-to-date with their current creditworthiness.

So how do you design a credit control policy that works for your business?

Developing a streamlined and efficient credit control system

Make your credit terms clear

Credit customers need to be aware of your terms and conditions and including them on all the documentation you send out is the best way to get this information across. You can also state your intention to act if payments are late.

Typical terms and conditions for credit might include:

• The due date for payment
• Whether you will charge interest on outstanding amounts, and the interest rate
• Accepted payment methods
• The currencies you deal with

By including these details on all customer correspondence, including the original contract, order confirmations, and your invoices, you clearly set your expectations and the action you will take where necessary.

Use management software to keep control

Automation is a highly effective way to streamline your credit control and centralise the information you need to stay on top of payment issues. Within a management system you can view customer credit limits and any history of late payments, and send payment reminders promptly.

Collecting in older debts can be particularly difficult so it is important to be proactive if a customer has not complied with your payment terms. Automation keeps you on track with this and reminds you to take the necessary action.

By regularly reviewing customer credit limits, and lowering or removing the credit facility where necessary, you reduce the likelihood of bad debts and protect your business’s cash flow.

Offer a range of payment methods

Invoicing as soon as work is complete encourages fast payment but it is also important to offer a variety of payment methods depending on your type of business and customer preferences.

Digital payments are quick and easy to collect and if you use accounting software to automate your invoices you may be able to include a link to pay. This is secure and convenient for most customers as payment can be made in seconds.

Offering multiple payment methods also increases your business’ credibility and encourages trust by improving the customer experience.

Improve your company’s credit control with clarity and consistency

Streamlining your company’s credit control frees up time to focus on attracting more sales and generally moving the business forward. Being clear about your payment terms, and taking a consistent approach in dealing with late payers, are both key for improving debt collection.

Technology can centralise the information you need, and provide a solid foundation on which to build a highly efficient credit control function that boosts cash flow and helps your business grow.

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