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How to improve your credit control process

Businesses

For many businesses, having a healthy cash flow is easier said than done. However, improving credit control processes can help improve cash flow, which is why we’ve outlined some areas for businesses to consider taking, to streamline their credit control operations and improve overall cash flow.

1. Research New Clients.

Undertaking a simple credit report on a new customer can quickly and easily help you identify whether there may be future issues receiving payments from them.

Understanding which of your customers pose the greatest risk to cash flow will help you decide whether their terms and conditions will need updating to make sure your company is somewhat shielded from any problems that may arise.

Additionally, creating a list of those most likely to pay late, and continually monitoring that list, will help you take action more quickly to prevent late payments.

2.Create positive working relationships with customers

Credit control can often seem like an intense “take no prisoners” type of role, however, it doesn’t have to be that way. Creating and maintaining good relationships with your customers can go a long way to help you receive timely payments, without the need of making demands or threats.

Making courtesy calls to confirm receipt of paperwork, or in advance of their payment date, will portray your business as a professional and friendly enterprise, whilst also offering customers the chance to give prior warning if your business should expect a late payment.

3. Improve efficiency of invoicing

Introducing effective invoicing methods can make a huge difference in ensuring your business is paid on time. There are recommendations that businesses:

  • Send invoices as soon as orders are fulfilled
  • Send invoiced electronically rather than through the post
  • Ensure invoices are addressed to the correct individual
  • Triple check invoices to make sure there are no mistakes
  • Confirm that the invoice has been received

There may be some instances where not all these recommendations can be met, such as having a customer that insists on receiving their invoices through the post. However, implementing each of these actions will help prevent any delays and build good relationships with your customers.

4. Incentivise early payments

As an attempt for businesses to dissuade customers from making late payments, they could think about introducing incentives to the credit-control process.

This could include rewarding customers with a discount if they make payments within the agreed credit terms. These types of incentives can be incorporated into your pricing structure to ensure profit margins aren’t affected.

5. Review your processes regularly

Existing credit control procedures should be reviewed regularly to make sure the steps involved are still as streamlined as they can be and provide results.

Realistic timetables should be established and reviewed to make sure the tasks involved are still manageable, and the credit terms, which should be based on business needs, are still applicable.

Processes for sending reminders, chasing payments, and establishing when it is necessary to pass a debt over to a reliable debt collection agency, should also be created and reviewed, to make sure those in your credit control team are following the same standardised stages.

Having a record of your credit control processes will help maintain standards, and reduce the number of issues faced if there is a late payment.

6. Ask for help with your processes

If your business is struggling with its credit control process, or you have issues with late payments, you can always ask for help. Whether this help is outsourcing the task to someone else or looking for other finance software that can help you streamline your credit control processes, the choice is up to you.

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