Credit control is a complex process that requires a careful balance of organisation, perseverance, and patience. Things can go wrong very quickly, and when they do, it can be difficult to rectify them.
With this in mind, we’ve popped together a beginner’s guide to getting off to a good start with credit control.
Make Time for Credit Control
Credit control is one of those tasks that tends to get pushed to the bottom of your to-do list. You either consistently run out of time to make any headway with it, or you simply dislike it and so put it off until the last possible minute.
While this is understandable, not making credit control a priority can lead to significant problems for your business. Unpaid invoices build up and quickly become aged debt – the longer aged debt is left, the more difficult it becomes to obtain. This then begins to impact your cash flow, and the entire process becomes even more challenging.
Instead, it would be hugely beneficial to your business to block out time for credit control. Dedicate a set amount of time per day or week to ensure that invoices have been raised correctly, payment reminders have been issued, and late payments have been followed up. This way, you won’t be trying to cram a few calls in on a Friday afternoon, and you won’t have to concern yourself with built-up aged debt.
Making credit control a priority (if only for a few hours a week!) could significantly benefit your business.
Keep it Professional
When payments are late or proving difficult to obtain, it can feel like a personal attack on you and your business. In turn, this may lead to feelings of frustration that could have a tendency to seep into payment chasing phone calls. While your frustrations are valid, they can run the risk of severing important customer relationships if they’re allowed to bubble over into conversation. Not only could this lose you a client, but it may also mean that they’re even less willing to pay you than before.
With this in mind, it’s important to remember that most of the time, credit control isn’t personal at all. Nine times out of ten, payments have been missed or forgotten by mistake or delayed due to heavy workload. Reminding yourself of this when making phone calls will ensure that the conversation remains calm and pleasant, upping your chances of receiving the payment you’re chasing. You’ll also ensure that customers are kept onside.
Keeping an emotional distance from credit control is definitely one of our top tips.
Ensure You’re Knowledgeable
Credit control can be complicated. With so many businesses to keep track of, invoice numbers to find and payment values to know, things can become messy very quickly. The last thing you want to be doing is making credit control calls without the correct data to hand or making mistakes when giving out information. Not only would this complicate the process further, but it could also cause further payment delays.
To combat this, it’s essential to put a system that works for you in place. Ensure that you’re storing all of your credit control information in a logical way that makes details easy to find, and make sure you know who you’re calling and what you need to ask for before you actually do it. This way, any time spent on credit control will be efficient and worth your while.
Don’t Wait for Payments to Become Late
A common credit control misconception is that you should wait for a payment to become late before you do anything about it. If we’re honest, this couldn’t be further from the truth!
Instead, sending out regular statements of account and confirming before payments are due ensures that invoices have been received and any queries linked to them are avoided. Not only does this keep everyone in the loop, but it also ensures everything is in order before payments are due, avoiding a rush at the last minute that could result in a late payment.
It really does pay to be organised – get those statements of account sent out in plenty of time!
Enlist Expert Support
The credit control process is challenging. It’s time-consuming and frustrating, and it can become a real source of stress if an effective system isn’t being utilised. The good news is, however, you don’t need to handle your credit control by yourself if you don’t want to.
Investing in the support of credit control experts means you’ll maintain customer relationships, avoid or reduce aged debt and receive timely payments – just without all the hassle for you. You’ll also have professionals on hand who you can turn to for advice and guidance that will ensure your credit control system remains effective throughout your business journey.
There are experts out there who dedicate their working lives to supporting businesses like yours with credit control – utilise them!
Assessing your Credit Control Process
Now that we’ve been through the basics of what a good credit control process should look like, it’s time to analyse your current procedure. Then, if something isn’t working as it should, you’ll be fully equipped with the tools you need to make small but impactful changes that will benefit the way your business runs overall.
With this in mind, here are six reasons why your credit control procedure may not be working, and our top tips for best practice.
1. You aren’t credit checking new customers
Getting a new customer is exciting. You want it to work out, and you want it to work out as quickly as possible, so you skip a few steps in order to seal the deal. Unfortunately, one of those steps is very often a credit check.
In fact, less than 50% of businesses run a credit check on new customers. We understand why, it’s time-consuming, and you just want to fast-forward to the part where you get your money. Without doing a credit check, however, you run the risk of payment never materialising at all. You’ll then have to spend time making collection calls and could even run the risk of the payment turning into aged debt.
A quick credit check eliminates all these issues – taking the time to do one before you finalise with your new customer could save you copious amounts of time and money later on down the line.
2. Your credit control process isn’t consistent
A lack of consistency within your credit control process gives the green light to late payers. When working with businesses on their credit control, we quite often see them going in hard on late payers for the first few weeks before eventually tailing off and just sending the odd email here and there.
While we know how draining it can be to keep on top of collection calls, being consistent with them lets your late payers know that this isn’t something that will just disappear. Inconsistency gives them permission to keep evading your requests.
What we like to do is flag these problem payers and assign one member of staff to chase them frequently (still in a polite, professional way, of course!) You’ll find that this has far more of an impact than starting strong and then failing to follow through.
3. You’re continuing to supply late payers
When a customer continually pays late or avoids making a payment altogether, it’s essential to break the cycle. If you continue to supply your products or services to late payers, you run the risk of negatively impacting your cash flow or even building up aged debt that can be incredibly difficult to obtain.
Instead, be firm with your payment policies. If a customer pays late more than once, remind them that they will need to pay in full before they can continue to use your service. While turning down a customer may go against everything we’re taught about running a successful business, in this case, it will only serve to benefit you and your business in the long run.
Put your payment terms into place, make these clear to your customers, and stick to them!
4. You’re passive when it comes to collection calls
Severing customer relationships is a fear many businesses have when it comes to credit control. They fear that if they go in with demands and threats, they might obtain a payment and simultaneously lose a customer.
Because of this, there is a tendency for your credit control process to become a bit too passive. While being polite and professional is a must, you don’t need to bend over backwards to accommodate a late payer, and you certainly shouldn’t let them dictate your payment terms for you.
Communication is key here. State your payment terms in a fair but firm manner, and your customers will always know what to expect when it comes to paying up. The last thing you want to do is start bending your own rules for the sake of a customer who has failed to pay you on time.
Firm but fair is the way to go!
5. You’re spending too much time chasing aged debt
Aged debt is a problem, full stop. Not only does it impact your cash flow, but it can also be incredibly difficult to get rid of. This means that you’ll likely want to put some time and effort into chasing and obtaining as much aged debt as possible.
While this may be done with good intentions, it can also be incredibly time-consuming and may mean that you’re neglecting any new credit control issues that are arising. Instead of focusing all your credit control efforts on collecting aged debt, focus your attention on collecting recent late payments. Not only are these more likely to be paid, but it also means they won’t be added to the aged debt that has already built up.
If you’re concerned about your aged debt, the best thing to do is invest in professional credit control support. This way, both your aged debt and recent late payments will be taken care of without having to prioritise one over the other.
6. You’re taking on more than you can handle
Credit control is time-consuming, and you may not have the extra staff or extra hours available to keep on top of it. A credit control system that isn’t well managed then runs the risk of becoming flawed, leading to costly issues later on down the line.
Instead of trying to handle everything yourself, it may be more beneficial to invest in a credit control specialist who can share the load. Here at The Edwards Company, we have a range of flexible, affordable credit control packages available designed to support businesses like yours.
Whether you require as little as eight hours of support per month, all the way through to forty hours and beyond, our credit control specialists are on hand to accommodate your needs.
If you’re struggling to get to grips with your credit control process and would like more information on how we can help, please do not hesitate to get in touch.