Credit Control Tips | Cash Flow is King in Every Business
Tuesday, July 17th, 2018 | The Cash Flow Group | Comments Off on Credit Control Tips | Cash Flow is King in Every Business
So, what is credit control? Every business wants to earn money and make a profit. Businesses offer quality goods and services to their clients and stand out from their competitors. It makes good business sense to then invest this profit back into the business. Then they can provide more a comprehensive list of services and offer better products for their clients. This in turn ensures that clients are then receiving the level of service they would expect.
All of the above makes the ideal business model, maybe in the world of make believe, but let’s step into the real world of business & 2018. Since the recession of 2008, businesses have been suffering as a result of late payment behavior by their clients. Billions of dollars are written off by US businesses each year because of late payments and poor credit control . It’s become a norm for big businesses to hang smaller businesses out to dry. They go unpaid for long periods of time hoping they can cut a deal with liquidators and settle only percentage of what was owed.
This scenario is a very sorry state of affairs. How can we resolve the issue ensuring clients pay accounts on time? Credit control is the answer. These simple tips can be implemented to your business to deliver results straight away & ensure that your cashflow remains intact:
1. Master credit control by clearly setting out your Payment Terms & Conditions
It’s extremely important to set out company payment Terms & Conditions in writing. This can be included in your Terms & Conditions on contracts or credit application forms and stated on invoices. It amazes me the amount of businesses who simply don’t have any payment Terms & Conditions. If they do, their clients are not aware of them as it has not been brought to their attention before. Debtors are very conscious of what they have to pay but this must be set out in black and white. If not, the company has nothing to fall back on should the debtor resist payment. Set out your Terms & Conditions in clearly to your clients to create a clear and consistent approach.
2. Send your invoices out with the goods or services
A lot of businesses we deal with raise invoices to their clients at the end of start of each month, by this time their client could have been in receipt of the goods or services they ordered for two to three weeks already before receiving an invoice from the company. This does not make good business sense, and invoices sent after at the end of each month etc are often paid late, and there is a stronger likelihood of them been settled quicker if they are in the client’s possession straight after the business transaction has happened. Sending invoices throughout the month and immediately after goods or services have been supplied is also beneficial because the company will have a constant cash flow coming in to their account.
3. Don’t be afraid to approach and speak to your clients about payment
By law you have to allow clients time to pay before you can pursue them legally for non-payment. This does not stop you calling or emailing them to ask when you can expect payment. Accounts receivable departments should have a robust process in place for this. They can call clients after invoices have been raised to deal with queries or disputes promptly. Then call or email them 15 & 30 days after the invoice has been raised to see when payment will be made. This demonstrates to clients that the business is very on the ball with their credit control. After 30 days contact should be made with the client on a daily basis. If this contact is not made it, implies that the company doesn’t need the invoice paid all that urgently.
All of the above are easily implemented into a business in turn leading to big changes within the business. Small modifications can lead to invoices being paid on time or more promptly.