Don’t let credit control make you lose control. A systematic and well-planned credit control strategy is essential for any growing business and will certainly help keep the wolf from the door.
Increasingly long payment terms and seemingly infinite competition has left many companies at the mercy of their large end customers.
A devastating number of businesses are forced to close each year because their customers owe them money – don’t let yours contribute to this statistic. Read on for our top five rules for good credit control.
1. Set an upper credit limit for each of your customers
This should be bespoke. Do your research; get references from other companies who have traded with them, do your own credit checks – these can be obtained easily and affordably online.
Then, once it’s set – don’t budge!
2. Decide a minimum order size for credit accounts
Make sure you’re in control – your sales contract should remind customers who benefit from a credit payment option that the goods belong to you until payment is received even after they’ve been delivered.
Don’t be embarrassed to create rules and stick to them. Obtaining references, checks and setting order thresholds all helps to convey professionalism and show that you mean business.
3. Use good customer service to your advantage
This is a double win where you’re concerned. Calling customers to check to see if deliveries have arrived and confirm their satisfaction is useful and courteous. You get feedback and it also gives you a chance to check that you have the right contact details for the payment communication.
Happy customers and happy you.
4. Understand the payment practices of your customers
Don’t get bitten by the increasingly standard 30-90 day payment terms. Ask questions and do your research, before you trade. Armed with all the facts you can plan or seek out alternative cash flow solutions.
Does your customer pay everything on a certain day each month? On an adhoc basis? Every three months?
5. Have a process
And follow it! Within your business establish a clear procedure for dealing with invoices and collecting payments.
Invoice promptly – this is vital if you want to demand efficiency in return. Set aside time each week specifically to chase payments and create a strategy that gradually escalates the pressure on those that don’t pay.
Be polite. Be persistent. Don’t apologise.