Credit control tips: Ongoing

There are many things a business can do behind the scenes to ensure the efficiency of your credit control. How many of these can you tick off?

1. Assess your performance

Always take time to analyse your business’s credit control performance and ask yourself if the process can be made more efficient, if the team is too big or too small and how your credit terms contrast to those of your competitors.

Central to this process is to compare your average debtor days with the industry norm. Look at the websites of your industry bodies and keep up to date with the news coming out of your sector – many will run quarterly surveys that indicate the sector’s health and the payment trends.

Using that information, you can accurately measure how your business’s credit control department is faring, and then take the necessary steps to ensure it’s where it should be. These steps could be to adjust the standard credit terms you offer customers, introduce early settlement discounts to encourage early payment of debts, renegotiate payment terms with your suppliers, or perhaps reduce the time before you refer debts to credit control companies.

By reacting to the latest trends, you can make sure your business remains on the front foot.

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2. Protect against late payment

It can often be beneficial to prepare for the worst by acquiring credit protection. Credit insurance protects a business’s cash flow from the repercussions of late payment and bad debts by safeguarding the business from non-payment through insolvency or protracted default, and policies can be tailored to meet your specific requirements.

Whilst whole turnover credit insurance protects your entire debtor book from late payment, selective cover insurance allows you to select individual invoices or debtors you would like cover to be provided against.

Though available as a standalone product, credit protection can also be provided through non-recourse invoice finance facilities that additionally release up to 90% of the invoice’s value within 24 hours of its issue to boost your cash flow. And while invoice discounting leaves your business in charge of the credit control, factoring additionally incorporates a dedicated sales ledger management service to remove the burden on your resources.

3. Outsource or hire a credit controller

Credit control ought to be an everyday business task given its importance to the success of your business – particularly for those with a large debtor book.

It could therefore be beneficial to hire a full-time credit controller who spends all their time keeping the business’s sales ledger updated, building rapports with your customers’ accounts departments and carrying out the basic credit control tasks. This blog post looks at the reasons, risks and rewards associated with outsourcing your credit control. 

In addition to explaining your favoured credit control procedure and providing the necessary training, it’s also important to listen to any ideas they may have to make the process more efficient. Ideally the credit controller would have an extensive background in credit management, but it can also be beneficial to employ someone with more basic experience who you can train up to perform the tasks in the manner you know works.

The alternative option would be to use outsourced credit control services from specialist debt collection agencies, removing the strain on your internal resources and benefiting from their extensive experience at credit management. This service can be completed on a disclosed or confidential basis depending on your preference, and ensures that your invoices are being chased by those with relevant expertise.

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4. Maintain a strong relationship with your bank

Because late payment can lead to considerable cash flow challenges for your business, it would be useful to be able to call upon your bank when your business is in need of short-term funding to fill the cash flow gap. Whether in the form of an overdraft extension or a cash flow loan, the likelihood of your bank manager accepting your request will often be affected by the strength of your relationship.

It’s therefore important to stay in regular contact, attend all scheduled meetings and inform them when you are experiencing any short-term cash flow difficulties. The benefits of such support, particularly during challenging economic circumstances such as these, cannot be underestimated.

Likewise, exploring cash flow solutions such as invoice finance which release cash against invoices within 24 hours of their issue can be beneficial to many businesses who trade on credit terms.

5. Thank customers who pay on time

Finally, thank all your customers that pay on time! Not only does it show you’re grateful for their punctuality, it is also good for customer relations and can lead to subsequent sales.

To see how Hilton-Baird can help your business throughout the credit control process, contact our team on 0800 9774848 or email