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Credit control timeline: 8 steps to collect payment from customers

05/09/2023

When it comes to credit control, having processes and a structure in place can be incredibly helpful. This is especially so when it comes to having a consistent timeline for your team to follow when recovering payment from customers – and particularly when that’s borne from experience.

Contacting your customers at key stages of the credit period and with the right tone will improve your credit control performance. But there is a balance to be struck between making too much contact, and not contacting them enough – both in terms of encouraging them to pay but also the demand that places on internal resource.

It’s also true that the most effective credit control timeline for one business will differ from another. It may also evolve, which makes it important to monitor and regularly review performance.

The key is to understand the most common reasons customers fail to pay on time, and work backwards to address the different pinch points. If customers regularly dispute invoices, focus on the accuracy of your invoices and confirming customers are happy with the invoice as early as possible. If they come up with the same excuses, consider what can be done to reduce them.

In this article and video, we look at the bones of a successful credit control timeline for companies to follow and adapt according to their performance, based on 30-day credit terms. We hope you find it useful.

Order received

Credit check your customer and ask them to complete an account opening form. This will help you to ascertain their creditworthiness, and also to capture key information about the business which will come in useful when contacting them during the credit period and in the event you need to instruct a debt collection agency. Also ensure they agree to your terms and conditions of sale, and record this consent.

Should these checks lead to concerns regarding their ability to pay you on time, consider asking for part of full payment up-front to protect your cash flow. You can then decide whether to accept their order.

Day 1

As soon as your goods and services have been provided or commence, and the credit period begins, send your invoice. Doing so electronically means they’ll receive the invoice straight away, and eliminates the potential for excuses such as ‘we didn’t receive it’.

Be sure to proofread your invoice to ensure it’s accurate, contains all the important information and accurately explains the work provided. Any errors or extras which haven’t been discussed with the customer will only delay things.

Day 14

Many businesses send an invoice and then wait until payment is overdue before they contact customers again, but they’re missing a trick.

By contacting them around day 14 – or potentially earlier – you have the opportunity to confirm receipt of the invoice, that there are no issues or disputes, and verbally confirm the date payment is due by.

Not only does this reduce the customer’s ability to make excuses for non-payment, it allows you to identify any potential problems early and work on resolving any disputes. It’s always a good idea to have a clause in your T&Cs saying that disputes must be raised within a certain timeframe.

Day 28

It can be equally effective to make another call a few days before payment is due to remind them about the due date and confirm your payment details. There are a number of benefits to this:

• It ensures your invoice is front of mind and not lost or misplaced
• It gives the customer the opportunity to let you know if payment is going to be late for any reason, which you can then address
• It demonstrates to the customer how effective your processes are, which suggests you don’t tolerate late payment and may encourage them to pay your invoice ahead of others

Day 31

Now that the invoice is overdue, don’t delay in contacting your customer! Call straight away to check on the status of their payment. It may be that the funds are clearing, but it may also act as a reminder in case there was a genuine mistake.

If they avoid your call or come up with onerous excuses, then straight away alarm bells should ring and further attention placed on that account.

At this point, also be sure to update your cash flow forecasts in case that missed payment could have a negative impact financially. Steps can then be taken to address those issues.

Day 37

Should payment still not be forthcoming, send a more assertive letter or email to the customer explaining that payment is a week overdue and that you have the right to charge statutory late payment interest and compensation if payment isn’t made.

When following friendlier phone calls, more formal written communication such as this can provide the encouragement customers need to pay invoices, whilst also giving you the ability to eloquently explain the reasons their payment is important.

Calculate how much interest and compensation you can claim here.

Day 43

By now, and dependent on responses to prior communication, alarm bells should be ringing loudly.

Send another letter to your customer explaining that you don’t tolerate late payment, and that you’ll be instructing a debt collection agency to assist in the matter if payment still hasn’t been made in the next seven days.

Often, the warning of a debt collection agency can be what’s needed for the customer to pay. Companies generally don’t like the idea of being chased by debt collection agencies and don’t want to have to explain to them why payment hasn’t been made.

Day 50

Unless a satisfactory reason for non-payment has been made, it’s important to then follow through on your warning – not just to show you weren’t bluffing, but also because the likelihood of you recovering money from the customer is falling by this point.

Debt collection agencies such as ourselves bring authority to situations such as this. They will start by contacting the customer to introduce themselves and explain their involvement, and understand why payment hasn’t been made. They’ll then use their expertise to respond to different excuses and try to bring a quick resolution.

At Hilton-Baird Collection Services, we have more than 20 years’ experience of recovering unpaid invoices on behalf of our clients across a wide range of industries. We take pride in our professional approach, preferring mediation to legal proceedings, in order to recover the money owed to our clients whilst preserving customer relationships.

If you’re worried about an invoice that’s owed to you or your customers are ignoring your attempts to recover payment, call our award-winning team on 0800 9774848 or request a call back to discuss how we can help. Alternatively, get an instant debt recovery quote here.

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