Many people think of credit control as making a few phone calls towards the end of the month. In truth, effective credit control is so much more and could make all the difference to your cashflow.
Good credit control starts from day one. Conducting thorough initial checks is essential at the start of any business relationship. Find out exactly who you are dealing with and what their legal status is. For example:
- Mr John Smith – an individual
- John Smith trading as John Smith Printworks – a sole trader using a trading name
- John Smith Printworks Limited – a limited company
- John Smith Printworks LLP – a limited liability partnership
It could become problematic further down the line if there are difficulties with non-payment and you do not know exactly who your customer is.
Do a credit check. It is a good way of alerting you to any potential risks.
Set credit limits. Ensuring that you set realistic credit limits and then sticking to those limits is a good way of making sure that customer accounts are reviewed regularly.
Have written terms and conditions. Ensure that your terms and conditions of business are clear and concise. They should set out when payments are due and what will happen if payment is not received on time – for example, will you charge interest?
Take immediate action. When an invoice becomes overdue, chase it! If an invoice is due for payment by the end of the month, pick up the phone as soon as the date for payment passes. It could just be an oversight on the customer’s part, but chasing invoices in a timely manner shows you are serious about getting what is owed to you.