How to Improve Your Credit Control Process?

Effective credit control is one of the essential parts of running a successful business. Your company’s cash flow can be seriously impacted without getting payments on time, and the resulting problems can quickly get out of hand.

Many businesses fail to realise that avoiding late payments and bad debts starts as soon as an order is placed; your credit control processes need to reflect this. It is a critical process that begins with learning about your customers before you sell to them and ends once you’ve been paid.

This article talks about the importance of credit control and shares tips for businesses to follow to get paid on time each time.

The Importance of Credit Control

Cash flow is the lifeline of any business. Without it, a company cannot invest in new products, recruit new employees, or pay its bills. This is why credit control is so essential – it is one of the primary ways businesses ensure they have sufficient cash to carry out their operations.

Credit control involves monitoring and managing a business’s accounts receivable, i.e., the invoices it has issued to customers but hasn’t yet been paid for. Companies can improve their cash flow and prevent financial troubles by meticulously monitoring these accounts and taking action when payments are late or delinquent.

Tips to Improve Your Credit Control Process

Here are some tips you should follow to improve your credit control process.

1. Develop a Comprehensive Credit Control Process

Given the importance of credit control, businesses must develop a realistic timeline to ensure no delays in payment.

The timeline must include all the steps that should be completed and followed by all the employees within your organisation.

Credit terms are crucial; these need to be set based on how quickly you have to pay your suppliers. Once you have established these terms, you can focus on the steps involved in chasing payments. For instance, your process might consist of the following:

  1. Establish the importance of timely payments by sending polite reminders of the payment schedule to customers once the order is completed.
  2. Send a reminder letter the day the invoice becomes overdue.
  3. Send letters every week if the payment is still not made.
  4. After a particular period, it might be helpful to pass the debt over to a dependable debt collection agency.

Recording the entire process ensures that all the parties involved know the terms and conditions. Moreover, it will also help mitigate the problems associated with delayed payment before they even occur.

2. Research New Clients

A little amount of due diligence beforehand can considerably improve the credit control process. Undertaking a basic credit report on a new client can help you understand if they’ve had any problems making payments previously and identify which customers pose the most significant risk to cash flow.

You can conduct credit checks cost-effectively and quickly online. In most cases, you will only need a business:

  • Complete trading name
  • Address
  • Registration number
  • Key contact information

Undertaking these checks doesn’t guarantee payment. However, it lets you make informed decisions about the terms and conditions associated with every transaction.

3. Maintain Open Communication

Credit control is also about fostering strong customer relationships, apart from the fine print of background checks and contracts. You should encourage open communication so that a client can talk about the issues if they are experiencing any problems.

If you know the reason for delays, you will be better positioned to manage cash flows in the meantime. Ensure to maintain records of all communications to deal with disputes and payment queries more effectively.

4. Invoice Accurately and Quickly

Another way to improve your credit control process is by invoicing accurately and quickly. Here are some essential tips that allow your organisation to improve the process’s efficiency:

  • Send invoices as soon as orders are fulfilled
  • Email invoices instead of sending them via post
  • Make sure the invoice is sent to the right individual
  • Ensure that there are no errors in the invoices

After you have sent the invoices, it is essential to confirm if the other party has received them. Doing so can help to overcome possible issues at an early stage.

5. Simplify the Payment Process

Long gone are the days of cash deposits and paper checks. Today, several businesses prefer collecting payments electronically. A smooth and seamless payment process makes it extremely simple and easy for customers to pay you on time. It is an excellent idea to offer a variety of payment methods so that clients can choose whichever suits them. These might include:

  • Debit/credit card
  • BACS
  • Online Payments such as PayPal and Stripe
  • Cash

6. Encourage Early Payment

Clients love discounts. Thus, one of the simplest methods to improve credit control and ensure timely payments is by providing incentives for early settlement. You could give a small percentage of the total bill or give some freebies to keep clients on track with payments.

Even though this might seem like rewarding bad behaviour, it might mean that your business receives its payments sooner. You can incorporate these incentives into your pricing structures to not impact your profit margins.

7. Seek Professional Support

Suppose your business continuously faces delayed payments and you’re struggling to deal with the burden of credit control. In that case, it might be a wise and more cost-effective decision to seek out professional support.

Outsourcing your credit control to a professional accountant can considerably increase your chances of getting paid on time.

Last Few Words

Contact ISA Consortium today if you are facing trouble chasing your invoices or have had client relationships suffer due to late payments. We can help you implement a credit control process that ensures your company gets paid without any trouble!

Book your free appointment with ISA Consortium

For more information and professional advice, please get in touch for a free appointment. We will discuss all the needs of you and your business, and head you in the right direction for future business .

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We offer all the above as part of our full Tax Services and Accounting and can also help you with Capital Gains Tax, Inheritance Tax, Retirement Planning, even filling out your Self-Assessment Tax Returns for you.

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