Actively managing your credit control is vital for maintaining a positive cashflow, but many businesses struggle with it. Unfortunately, losing focus on credit management can often mean losing revenue and profits.
Credit control is not necessarily debt collection or debt recovery. Properly structured, credit control can potentially avoid having to write off debt, or organising a collection agency (at a cost) to recover the payment for you. In other words, good credit control means a good bottom line.
Some issues companies and businesses, regardless of size, face with credit control and credit management is the time it takes, the attention, and the resources. It can be complicated, it can be a minefield for customer relations, it can be time-consuming, but it is a resource that could and should be managed well.
When you don’t receive payment upon delivery of a product or service, you effectively give your customer a line of credit. While your customer has credit – and the product or service you’ve delivered – you still haven’t been paid. You also have to pay YOUR suppliers, and if you’re not receiving your payments, your ability to pay your bills will be affected.
If you have a small customer list, managing your credit can just be a simple case of dedicating time on a regular basis (at least weekly) to following up on your invoices. For larger companies, or those experiencing accelerated growth, managing a growing list of clients, as well as keeping track of invoices, payments and debts, can become challenging.
Here are three tips to help you manage your credit control:
- Credit applications – know who you’re dealing with, and agree to terms.
- Collection process – establish a practical, efficient process of invoicing out, following up and collecting payment
- Delinquency action – be prepared to abide by the agreed terms. This includes putting a customer on hold if their account becomes delinquent, escalating the matter to the owners, or possibly even to legal.
Before getting to the legal stage, though, there are a number of practices that can be actioned to avoid further costs, maintain that customer relationship, and brighten up that bottom line.
For more information on credit management, contact the Admin Plus team.