Cash flow is very important to all businesses, large and small. So here is your quick credit control checklist to help you get paid on time.

1. Are your payment terms clearly defined?

Many companies have varying payment terms for their customers based on the customers credit health. However, many companies also have standard payment terms that apply to all customers, for example “payment required within thirty days.”

The question is, do your customers know what your payment terms are? When you take on a new customer, make them aware of what your payment terms are and how they can pay. Make sure your invoice also includes your payment terms on it too.

2. Run credit reports and check the status of potential customers

Customers with bad credit or CCJ’s are at a higher risk of not paying you, as opposed to a company that doesn’t have any. If you don’t check the credit status of your customer you are taking a risk with your money. So credit check your customers and assess them before you offer credit.

3. Do you set credit limits for your customers?

A credit limit is the maximum amount of “loan” that you agree to provide your customer with. It should be set at the maximum amount that you are willing to lose should the company become insolvent.

Finances can change very quickly, so make sure that you monitor your customers regularly. Companies’ House website has a great tool that allows you to follow your customers. They will send you an update when company information changes at companies’ house, for example a proposal to strike off the company!

4. Are there signed agreements of your terms of business?

Don’t be afraid to let your customers know how you operate and what you expect from them. If you set your standards high it will create a professional outlook for your business. Terms of Business demonstrates a clear structured agreement between you and your customer, ensure it’s signed and returned before you do business.

“Something to think about: 50 percent of a credit manager’s time is spent resolving people problems related to poor communications and follow-up.”

5. Do you have a clearly written credit policy in place?

A credit policy is a clearly written document that all relevant members of staff should follow. It should include your terms and conditions for supplying goods on credit, what your procedure is if you don’t receive payment and what steps you take in case of customer delinquency.

6. Do you have written procedures in place for your core processes?

Defining how you run your business is key to ensuring that it runs in the same effective way each time.

Document each of the steps a member of staff should take and make sure that your employees follow those steps according to their job role.

Two great people that talk about this very passionately and effectively are Michael Gerber – Author of the The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It and

Gino Wickman – Author of Traction: Get a Grip on Your Business If you have not read either of these books, I would highly recommend doing so!

They explain how you can get a grip on your business and take the necessary steps to make it a great success.

7. Is a third party debt recovery company used when your collection process fails?

At what point do you instruct a debt collection company to help recover your monies?

If you use a debt collection company, document at what point you/your appointed member(s) of staff are to pass the debt over to them to help you recover your money.

If you don’t wish to use a debt collection company, what are the steps you take when the money owed becomes a debt? Write them down so that they are clear for everyone.

Further reading on “Why Use a Debt Collection Agency is here” >>

8. If you use a debt recovery agency, are they cost effective and successful?

Does the debt collection agency you use work on a success based fee? What commission do they charge you after they recover your monies? Many Debt recovery agencies charge varying fees, make sure the one you use is competitive.

It is also important to note whether they operate in a friendly and ethical way. Choosing a company with good ethics and a high success rate is far more important than a company who may use threats or other unethical tactics to recover your money. A firm but professional approach is always key.

On many occasions we have found that our clients would like to retain a future working relationship with their debtor, in which case careful negotiation and rapport building plays a key role. Don’t be afraid to ask the debt recovery company how they will approach your customers.

9. Do you have a good query management system in place?

Invoice queries or disputes are one of the most common reasons why an invoice remains unpaid. Perhaps your customer needs a copy invoice re-sending? Maybe your customer does not agree with the price on your invoice.

What is your system for managing a dispute with an invoice, where do you document the dispute? Who deals with it? Who will have the final say on what happens?

A simple spread sheet for smaller companies is just as effective. Work out how this will work best for your business, because it is imperative to the success of effective credit control.

10. Are your staff well trained in professional credit management skills?

If you have your own in-house credit control team, ensure that they have sufficient training in credit management skills. There are lots of courses available out there, a main one being with the CICM.

We provide Credit Control & Credit Management consultancy to improve in-house credit control performance and procedures.

To discuss credit control solutions for your business, to improve your cash flow, recover aged debts and get paid on time, call us on 01494 422742 or contact us below.