4 credit control practices to leave in 2017
As we enter 2018 it’s a good time to look back at your credit control performance in 2017 to identify your strengths and weaknesses. This will allow you to adapt your processes so that you can start the new year on the front foot.
But no matter what your business does or industry you’re in, there are certain credit control practices that we think would be better left in 2017.
1. Using manual processes
Slow paper-based systems and a lack of automation were the two biggest causes of late payments in 2017 according to the Friction Index research conducted by Tungsten Network and the Institute of Finance and Management.
This suggests that by ditching your slow and manual processes you could improve payment times.
So, as we enter 2018 now might be the time to look at automated systems to improve your in-house processes and hopefully your credit control performance.
This blog post looks at 10 reasons why e-invoicing is good for your cash flow.
2. Continuing to supply late payers
Whilst ending customer relationships is a last resort, when those customers are coming between you and a healthy cash flow, they are arguably no longer worth the money they spend with you.
According to Bacs Payment Schemes, UK SMEs are owed £14.2 billion in overdue payments – a number that could be significantly reduced if businesses stopped supplying repeat offenders.
Yet, many businesses continue to work with those who pay late with few repercussions for their poor behaviour.
Persistently late payers are never going to clean up their act if you keep letting them get away with it.
It can be beneficial to place the worst offenders on a ‘stop list’ and warn them that they will not be supplied with any further goods or services until all outstanding invoices have been settled.
This pause on supply is often enough to encourage them to clean up their act.
If after this you continue to supply the customer, you might decide to ask for an up-front payment or deposit when they place the order so that you don’t become stung by late payment again.
This blog post shows why not supplying bad customers makes perfect business sense.
3. Letting large businesses bully you
Larger businesses are responsible for the majority of late payments made to SMEs, according to results from the Zurich SME Risk Index.
This supply-chain bullying has long been a problem for SMEs. The government has tried various initiatives to discourage this behaviour including appointing a Small Business Commissioner and introducing new payment reporting regulations. But, late payment continues to cause cash flow problems for small businesses.
Therefore, it is essential that you take the steps to protect your business from this behaviour.
Understandably, many small businesses feel as though they cannot respond in this way to large businesses due to the value of the contract, and the prestige of being associated with such a big brand.
But, if you’re being forced to accept credit terms of 90 or 120 days – plus late payment delays – your cash flow could struggle as a result.
So, it’s time to put your business first. And, if they value your product or services they will respect your payment terms.
This blog post looks at what to do when your most valuable customers don’t pay.
4. Wasting time chasing old debts
As debts get older they become harder to collect, which can consume a great amount of your time and resource.
Every second you spend chasing a dated invoice you’re taking time away from newer invoices that have higher chances of collection.
Neglecting the remainder of the sales ledger in this way can lead to more severe problems further down the line.
So, if you don’t have the necessary resources in-house to commit to chasing these old debts alongside the newer additions you might benefit from outsourcing these overdue invoices to a specialist debt collection agency.
This will remove the burden from your business and also bring their expertise to the process.
You can outsource one-off debts as and when you need assistance. Or, it could be beneficial to opt for ongoing support with all invoices which reach a certain age so that you can concentrate on other invoices knowing that your aged debts are in safe hands.
This allows the debt collection agency to become an extension of your credit control team working with you to get the best results for your business.
This blog post offers tips on how to choose a debt collection agency.
To discover how we could help your business with ongoing credit control or debt collection, please call our team on 0800 9774848 or request a call back today.