5 effective credit control strategies to implement after making a sale
If you’re waiting until a payment is late to begin implementing credit control strategies, you’re waiting too long. Good credit control should begin as soon as an order is placed, to help you avoid the risk of late payment and bad debt.
Possibly the most critical period in the credit control process begins after the sale. At this point you should still have your client’s attention and your relationship with them will be at one of its highest points.
Read on for 5 effective strategies that should become second nature in your credit control cycle.
Invoice quickly and accurately
This may sound obvious, but many companies still find they have room to improve here. As some businesses won’t pay until they receive an invoice, you want to make sure this happens as quickly as possible to avoid delays. Faxing or emailing an invoice is quicker than sending it by post.
You should also make sure the information is correct and clear, with the following information included:
- Addressed to the right person
- Detailed description of goods and costs
- Reference number
- Purchase order number (if required)
- How and where to pay
- Credit terms
Once you have sent the invoice, we would also recommend making a courtesy call to the customer to check they have received it, that there are no disputes and they are aware of the date it must be paid.
Clearly state your terms and conditions
Make sure that your terms and conditions are clear across all your correspondence (contracts, order confirmations and invoices) as well as informing the customer during the sales process.
As mentioned, invoices should display your credit terms clearly. Your credit control procedure in the event of late payment should be explained, whether it’s charging interest, taking legal action or passing the client to a collection agency.
Maintaining a clear and consistent approach to your terms and conditions will demonstrate to the client that you do not condone late payment and are prepared to take action if they do not pay.
Maintain a positive relationship
As with all your communications with a client, the better the relationship is the better the outcome is likely to be. A strong relationship will encourage them to do business with you again as well as improving your chances of being paid on time.
In addition to building a rapport during the sales process, taking the time to make follow up calls and maintain a relationship will help. Following up on the arrival of the invoice and the status of the debt are good ways to do this.
If you don’t already, you may wish to think about incentivising your sales team once payment has been made by the customer. This keeps them motivated to reduce disputes and ensures credit control best practice is front of mind from the outset, and should also discourage them from overselling.
Finally, when a customer does pay on time make sure to reach out and thank them!
Make it easy to get paid
Looking at how you ask customers to pay their invoices could help you to make your credit control more efficient. There are many payment methods that could work well for you.
Cheques must be posted, take time to clear and are prone to human error. They are also susceptible to excuses such as ‘the cheque is in the post’.
BACS payments, meanwhile, increase the speed and reduce the admin burden on customers.
Direct debits and company credit cards can make the payment easier, and standing orders work well for customers who pay a set amount on a monthly basis.
Whichever method you use, invoices must contain all the information your customer will require to pay.
Encourage early payment
You may find that it would be more beneficial to your business to be paid most of the value early, rather than waiting for the full amount. Early settlement discounts can be a good way to incentivise customers to pay quickly, making sure you don’t run into cash flow problems.
This would lead to a slightly lower profit margin, and its effectiveness would depend on the impact it has on your business. However, the discount doesn’t need to be excessive or offered to every customer, it can simply be used for those who have a past record of not making payments on time.
Another way to encourage prompt payment could be to enter all customers who pay within a week, for instance, into a competition or offer, which could also help to build your customer relationships.
If you want to find out more about how we can help you to improve your credit control performance, you can download our credit control brochure or contact our team on 0800 9774848 (email firstname.lastname@example.org) to see how Hilton-Baird can help your business.