7 credit control mistakes that will haunt your business
Halloween is here. But forget the ghosts and ghouls of All Hallows’ Eve, business owners face something much more haunting all year round – late payment.
Without money coming in on time, cash flow can be significantly impacted and the associated problems can put a curse on even the most successful of businesses.
Fortunately, with an effective credit control procedure in place, the threat of late payment can be reduced.
However, despite knowing this, many companies continue to make the same credit control mistakes.
To help prevent late payment from keeping you up at night here are 7 common credit control mistakes that will haunt your business, plus tips on how to overcome them.
1. Lack of strategy
Many of the critical failures of victims in horror films could have been avoided with one key thing – preparation.
The same can be said for your credit control procedure; by failing to prepare you really are preparing to fail.
So, clearly set out a day-by-day strategy and make sure you train staff appropriately so that all stages are adequately completed and meticulously stuck to.
Ask yourself “what’s the worst that could happen?”, and make sure you know the answer and have plans in place for all of those situations.
2. Being too trusting
Some of the most haunting villains are capable of convincing others that they are trustworthy before revealing their horrifying ways.
The same can be said for customers.
Whilst on the surface they may seem like they can and will pay, the reality could be entirely different.
To ensure that you only trade with customers who will pay you, you should get to know them and their payment habits before offering credit terms.
This can be achieved by credit reports, account opening forms and online searches.
3. Not making the most of your weapons
There are lots of ways you can arm yourself in the fight against late payment.
But one of the most overlooked tools is the layout and content included on invoices.
An efficient and cleverly designed invoice can improve payment times considerably, whilst making errors on an invoice could lead to disputes on payment and be costly for your business.
Likewise, your terms and conditions are also a major component of protecting your business.
With effective T&Cs you can safeguard your business by setting expectations early on.
This can limit disputes and reduce the chances of any potential surprises in the future.
Plus, in the event something does go wrong, your T&Cs can be used as evidence in court if needed.
4. Letting the monsters rule
Unfortunately, some companies use their position to take advantage of other businesses.
This supply-chain bullying is not acceptable and should not be tolerated.
Some businesses, particularly smaller ones, feel like they have no choice and simply accept these poor payment practices. But this isn’t true.
It’s important not to let the fear of losing a customer deter you from taking action, whether you choose to take a firmer stance during your credit control calls or approach a debt collection agency or the courts.
Remember that by not paying you on time, that customer is putting your cash flow and business at risk.
5. Demonstrating beastly behaviour
When your customers are behaving badly it can be frustrating, but that’s never a good enough reason to start using beastly behaviour of your own.
When it comes to credit control, you need to be firm but fair and remain professional at all times.
Being aggressive towards customers is unnecessary and could damage relationships and your brand.
The important thing is to set the right tone and then remain consistent in your efforts to achieve the best results.
If you apply strong credit control processes for a short period and then slacken off, you’ll lose many of the benefits.
6. Hiding from your problems
When it comes to dealing with late payment and the associated cash flow problems you can run, but you can’t hide forever.
Without that money coming in your cash flow will suffer and your business may not be able to meet all of its commitments.
Statistically, the longer you leave it the less likely you are to get paid, meaning it’s vital that you act quickly in order to protect your business.
As soon as an invoice goes overdue you need to start the process to get back what you’re owed.
7. Taking on more than you can handle
Ever notice how as soon as someone tries to go off on their own in a horror movie it ends with screams?
The same can be said for credit control.
Maintaining an efficient credit control strategy can be challenging and time-consuming, especially with the added time it takes to chase late payments.
So, don’t try to be the hero and do everything on your own.
If you’re spending lots of time on overdue invoices to the detriment of newer items on your sales ledger it could be time to call in help.
By utilising the services of a debt collection agency, you could improve your cash flow and regain the time to focus on other aspects of your business.
Takeaway tricks and treats
So how do you avoid these 7 common credit control mistakes? Here’s a quick recap:
- Develop a solid credit management strategy
- Get to know your customers and their payment habits
- Invoice quickly and accurately
- Don’t let fear prevent you from taking action
- Set the right tone and remain consistent in your efforts
- Chase your customer as soon as an invoice exceeds terms
- Don’t be afraid to ask for help
For more credit control tricks and treats, take a look at these 101 ways to improve your credit management.
If your business is struggling with late payment, as a leading debt collection agency we could help. Contact us on 0800 9774848 or request a call back to see what we could do for your business.