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How to Improve the Credit Control Process for SME Owners

Every year, small to medium sized businesses here in the UK fail because they run out of the cash necessary to stay in business.  One of the main reasons for these failures is cash flow problems that arise from slow paying customers and /or bad debt.  Without a clear credit control process, your business’ ability to thrive will be at risk so we’ve put together some key steps you can take to improve your company’s credit control procedures and protect your business from failure.

Create a Credit Control Process – implement a co-ordinated procedure for credit control by establishing a realistic timetable which includes all stages that need to be completed and adhered to by relevant team members.  Credit terms based on how quickly you need to pay your suppliers should be set.  Once these terms have been established, set out the stages for chasing payments, for example:

  • Define the importance of prompt payment with a polite reminder on invoices informing customers of the payment schedule following fulfilment of the order.
  • Send a reminder letter/email on the day an invoice becomes overdue.
  • Send subsequent letters/emails every 7 days thereafter until payment is made.
  • In cases where payment is not made, pass the debt to a reliable commercial debt recovery service.

Research Customers – before offering them credit.  The cost of credit reports will be offset by discovering which of your customers pose a risk when it comes to getting paid for doing business with them.

Invoice Accurately and Quickly – to promote an efficient payment process:

  • Email (rather than post) an invoice as soon as an order is fulfilled.
  • Make sure the invoice is addressed to the relevant person.
  • Make sure that the invoice is accurate.
  • Check that the invoice has been received which will avoid problems from the start and build a good relationship with your customer.

Encourage Early Payment – by making sure that it is easy for invoices to be paid.  Make sure your bank details are clearly stated and that you accept different forms of payment.

Make Paying Easy – by accepting a variety of methods of payments (if possible), for example:

  • By cheque
  • BACS
  • Credit/debit card
  • Via online payment which is easy and convenient
  • Via PayPal
  • Cash

Paying online is often preferable nowadays as it is quick and can be done from the desktop or via a mobile device.

Build Business Relationships – with clear communication channels so that your credit control process is not a worry for your customers.  Make courtesy calls to confirm the receipt of invoices and their due date – this is a friendly and professional way to do business.

Make a Watch List – of clients who pay late so that you can de4al with them effectively in future by only offering credit terms if they pay a deposit.  Don’t’ be afraid to take action when it comes to persistent late payers who consistently ignore your calls and emails – a simple letter from a solicitor can often solve the problem immediately.