11 Ways To Improve Your Credit Control

August 31, 2011

by Justine Parsons

Credit control for many businesses starts with picking up the phone to chase an outstanding debt, but in order to protect your business and avoid bad debts, credit control should start back at your point of sale.

11 ways to improve your credit control

  • Ask your customer to complete a credit application form.
  • Obtain all relevant contact and bank details, including registered office and registration number if it’s a limited company, or full names and addresses of all partners if it’s a partnership. Make sure the form is signed and dated by the customer with a personal guarantee if required.


Check references of new customers
Get credit references from your customer’s bank and key suppliers. Questions to ask are:

  • How long has the company been a customer?
  • What is their average monthly spend?
  • What are your terms and does the company meet these requirements?
  • How long does the company take to pay their monthly account?
  • Has the company ever been on stop credit?
  • In general, are they a good company to deal with?

Agree payment terms in advance
Make sure your payment terms are clearly stated both verbally when orders are placed and on all paperwork that follows. If you charge interest on overdue accounts, this must also be stated at the same time.  Your credit application form should include your terms and conditions and be signed off by the applicant.

Send your invoice when goods are dispatched
Invoice within 24 hours of a chargeable event. Remember, nothing happens until your invoice gets into your customer’s payment process. The sooner you invoice, the sooner you get paid.

If you are a service industry charging at the end of each month, make sure your invoice is with your customer within 24 hours of end of month in order to meet your customer’s cut-off for accounts payable.

Check all invoices are sent to the correct address
The invoice address can often be different to the delivery address.  If emailing your invoice, make sure you have activated your delivery receipt tracking so you can confirm invoice was received.

Send a statement of account
Customers generally pay on time, or when reminded. Sending a statement showing overdue invoices will act as a reminder and usually prompt payment.

Develop a ‘friend’ in your customer’s company
This can prove invaluable when you’re chasing unpaid invoices.

Chase late payers promptly
Phone overdue accounts, chasing the largest and oldest debts first. Take prompt action — it’s cheaper than escalating overdraft interest. If there is no response, write a formal letter, followed by a final reminder letter seven days later advising that legal action will follow.

Chase late payers often

By keeping the pressure on your overdue accounts, you will keep your account high on their priority “must pay” list.  If after phoning you are told your payment will come through by the end of the week, and it doesn’t – phone back!  Refer to your previous conversation and ask for a commitment to pay.

Don’t allow customers to exceed credit limits
Credit limits are set for a good reason. Don’t allow them to be exceeded without your permission.

Set up a ‘stop list’
Make sure your staff know which customers are on ‘stop’ and do not allow any more orders to be taken without payment of outstanding invoices (or your personal authorisation).

Unless your business provides interest free loans, there is no need for you to do so!  By improving your credit control throughout the entire process, your cash flow and business finances will be the healthier for it.

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