Credit control is one of the many components needed for an effective business model, but implementing an effective credit control process can be a difficult task. At Lovetts, we work with professionals in this area every day, and here we look at some of the key strategies for success.
Research current and new clients
Research is pivotal in credit control because it allows a business to assess the risk that an existing client or prospect could pose in terms of making payments. Resources like Experian Business provide full credit reports on any business that allow credit control professionals to assess the risk. These reports allow you to gain clarity into who you're doing business with, and if they have a history of bad credit and payments.
Ensuring invoices are paid in a timely fashion can become an art for many credit controllers, in terms of striking the right balance between being proactive versus not wishing to agitate trusted customers.
There are a few different ways in which you can help to avoid delays:
- Send invoices by both email and post – this way it is more difficult for the client to make the argument that they did not receive it.
- Ensure that details are clear and correct – a more straightforward invoice will be less likely to incur questions around why it was raised, which can also be used to slow down the payments process.
- Include clear payment terms and conditions in the initial working contract. This can then easily be referred back to when required, even directly via a PDF link in instances where electronic invoices are sent through.
- If you do take on a new client that you are unsure about, it is possible to request advanced payment so that this is made before products/services are supplied.
Track and Manage
Keeping track of clients does not have to be onerous. Effective communications – and effective business relationships – are built on trust and transparency. Something as simple as a courtesy call or reminder email could be as much appreciated by your customer as it is at your end. In addition to tracking, you also need to manage the days that debts are allowed to go overdue before further action is taken. It’s a good idea to cultivate an understanding of how different payment amounts and time scales are met and the average time taken by a debtor to pay different amounts that are due. This data will also allow you to prioritise specific invoices and from there you can also consider outsourcing some of your more difficult debt chasing to a third party service provide.
Involve the whole team
One common practice for credit control departments is to put in place written procedures that explain step by step how to issue invoices and what the standard follow-up process for chasing invoices is. It is then much easier for a number of individuals to follow these guidelines and play a proactive part in protecting your business’s cash flow.
The right tools
Finally, finding the right tools to meet your businesses cash flow requirements can be an important piece of the puzzle in effective credit control management. While advanced software is becoming increasingly integral to credit control departments, it’s essential not to over complicate the process and to find the right tools for you. Services that help you to store all invoice communications and histories in one place for example can significantly simplify the process.
Ultimately, implementing an effective credit control process is about thinking about the entire journey from invoice creation, to client communications, to how to deal with late payments. Lovetts is on-hand to help you with this every step of the way, and you can find out further information here on our transparent and ethical service here.