Try the points below to improve your credit control and the processes of how you run your business.

#1 Are your payment terms clearly defined and relayed to your customers?

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

When you take on a new customer, make them aware of what your payment terms are, and how you accept payments. Then when you send your invoice to your customer make sure it also states your payment terms on there.

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

If a customer has bad credit or CCJ’s, they could be at a higher risk of non-payment, as opposed to a company that doesn’t have any.

But if you don’t check the status of your customer you are taking a gamble. You can quickly do a credit check on your current and new customers using software that is available on line, paid monthly. Even getting a credit report for £4.95 is better that risking not being paid.

#3 Do you set credit limits and credit ratings for your customers?

Making sure that your customer can pay you should be a priority to you. 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.

Things 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 anything changes at companies’ house, for example a proposal to strike off the company!

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

The way you do business should be clearly explained to your customer, don’t be afraid to let them know how you operate. If you set your standards high and show people what you expect, it will create a professional outlook. Terms of Business demonstrates a clear structured agreement between you and your customer. Ensure its signed and returned before you continue to 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?

Your credit policy is a clearly written and structured document that all relevant members of staff and yourself 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?

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

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.

#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.

We charge 9%+VAT for UK debt collections. No Win No Fee.

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 a 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. How you deal with invoicing disputes is the key to improving your chances of getting paid.

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 one to one, or multiple team workshops to improve credit control performance and procedures.