Credit Control Essentials You Need to Know

You’re not a debt collector, but if you give your clients credit, collecting payments from them is part of doing business. In addition, some of your clients will, from time to time, not pay you. You will need to deal with this too.

To help you with this process, here are the credit control essentials you need to know.

Put a Credit Control Policy in Place

The first step is to have a credit control policy. This will focus your mind and help you make decisions on how you want to operate credit in your business. Your approach to credit will also be clearer to your customers when you have a policy in place, plus your staff will know what you expect. This is particularly important for sales staff.

Make sure you include credit checks for new customers in your credit control policy.

Don’t Give Credit

You should also give careful consideration to whether you need to give credit in the first place. Many industries are moving away from credit and even in those where credit is still normal, the terms are much shorter.

It’s also important to consider your approach if you undertake big projects for clients, particularly if this involves a large initial financial outlay. In this situation, you may be able to ask for an upfront payment to cover all or some of this outlay.

Invoice Properly

Your invoices are crucially important to credit control in your business. Here’s what you need to know:

  • Ensure your invoices are detailed to minimise queries
  • Put your credit terms on your invoices
  • Put specific due dates if possible rather than, for example, “due in 30 days”
  • Invoice as soon as possible without unnecessary delays
  • Send the invoice to the right person

Know Who Owes You Money

Check your sales ledger and debtor list daily so you know who is overdue and who is at risk of becoming overdue. You can then plan how you want to approach these customers.

It’s usually a good idea to focus on the larger debts first followed by those that are the oldest.

Don’t Assume All Clients Are the Same

This is one of the most important things to remember with credit control. If you can get to know how your clients like to operate and then fit in with that as much as possible, your payments will come in much more smoothly. Here are some things you should know about each individual client:

  • How they like to communicate – text, email, phone, etc
  • How they like to pay
  • When they like to pay, i.e. do they have a monthly payment run
  • Who is responsible for approving the invoice for payment and who is responsible for processing the payment

Make Sure You Follow Up

This is the part of credit control that many people don’t like, but it’s crucially important. It is a fact that if you give credit in your business, you will have to chase clients for payment. Here are some tips:

  • Use members of your team – salespeople are a good example as they can be directly impacted by the client’s late payment, i.e. it could delay or prevent a future sale
  • Don’t be afraid to call – credit control phone calls are an essential part of the process
  • Meet face-to-face if you have to – the personal approach often works
  • Don’t just let invoices rollover – change payment terms, incentivise, get a firm payment commitment, etc
  • Keep a record of communications – to make it easier to follow up if the client doesn’t deliver on a commitment

Say Thank You

Finally, always thank your clients when they pay you, even when they pay late.

For more help or advice with your business, please contact a member of the Gilroy Gannon team today.

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