5 Tips To Improve Credit Control For Businesses

Introduction

The most challenging task in the company can occasionally be timely debt collection.

Collecting debts is a job that needs to be done proactively unless you work in a trade or profession where payment for goods or services is made upfront. When times are rough, effective credit control helps ensure that your company survives.

Your company will find it difficult to pay its suppliers, let alone pay its employees and payroll taxes to the Inland Revenue, which are usually due on specific dates if you fall behind in collecting what is owed.

Many firms utilise bank overdrafts to control cash flow, however, this is not the best option long term. Banks no longer permit businesses to use overdrafts since they are expensive, and in my experience, they are deliberately lowering the current overdraft limitations for small firms, as one of my clients is discovering.

So how do you put into practice efficient credit controls in your company?

For efficient credit control, you must carry out both simple and challenging duties. The main suggestions, starting with the simpler responsibilities, are as follows:

1. Send invoices on time and to the correct recipient.

Make sure your invoices are sent on time. Sounds easy, but many companies don’t follow through. Even better is sending the bill through email. Make sure it is delivered to the person in charge of authorizing and paying it.

2. Clearly state your terms on invoices.

The bill should explicitly indicate your terms and conditions. This is the agreement you have with your client. Why not request payment in 14 days as opposed to 30? Payers always like to take longer to pay, and 30 days typically equates to 45 or more days. Offer no discounts for paying early because most people will accept the discount and then pay you late.

3. Conduct credit investigations on clients and establish credit limits.

Always run a credit check on potential new clients, as well as recurring checks on current ones. You might not learn if a customer is having financial difficulties until your bill gets stuck. Numerous other organizations also recommend credit limitations for businesses.

4. Use a debt collection company to recover outstanding debts.

When all else fails, you must pursue the older bills through a debt collection agency. Some people take this action after a debt has gone unpaid for 90 days, while others wait longer. The likelihood that the debt will go unpaid increases the longer you hold it. Use a trustworthy debt collection agency like MNS Credit Management Group, which not only takes care of your outstanding debt but also provides buyer’s business information reports.

5. Review your debtor days monthly

By measuring the ratio of debtor days (the typical time it takes to pay off debts), as shown below, you may evaluate your progress each month.

When debtor days increase, it’s time to consider what the underlying problems might be. By using the collection integration to that client over time, you may also determine this ratio for specific customers. 

Conclusion

Some people might have noted that I haven’t mentioned using legal means to collect past-due bills. That’s because if you get to that point, you’ve gone beyond the typical processes and will have to spend a lot of time and money pursuing the debt, which is something that effective credit control should prevent.

Building strong relationships with the main figures in your customer’s business is the most crucial debt collection strategy since it will help you recover your debts with the least amount of trouble and effort.