Top Service News
Credit Control Tips
Published on
When do you start your credit control process? Upon an overdue balance or earlier? Starting your credit control process as soon as you are approached by a potential new customer for a credit account can save you time, money, reduce the risk of bad debts and keep trading relationships healthy.
Below we reveal our top 10 credit control Tips to ensure an effective credit control process.
- Credit Control Guidelines & Policies.
Establish credit control guidelines to efficiently handle overdue balances.
A credit policy provides a framework for managing credit related processes, sets clear expectations and promotes efficient communication within a construction business.
By implementing and adhering to a credit policy, businesses can mitigate financial risks, improve cash flow and support sustainable growth.
A credit policy should also determine how often you’ll contact the customer and when & how as well as the duration of time before passing the overdue balance to a third party for collection.
- Credit Application Forms.
A good credit application form will assist you in your due diligence as well as recovery. Information is key and a completed credit application form can give you all the necessary information to help you decide whether to extend your credit facilities to this new customer. They can also assist you in understanding what your customer needs from you in order to make payment, for example, do they need purchase orders? Knowing exactly who you are dealing with and avoiding any miscommunication can also prevent any disputed balances. You can download a template credit application, designed and supplied by Top Service Ltd here: /factsheets/credit-application-form-guidance.pdf
- Credit Reference Agencies.
Credit reference agencies can also assist you in deciding whether or not to extend credit facilities to a potential customer by first providing a credit limit and score. The right credit information provider for your business should be knowledgeable about your industry. They should be providing you with information to support your business and keeping you up to date with changes to the financial status of your customer, that may result in a risk to your business. These early warnings will help to minimise your exposure to bad debt..
- Account Management.
Checking in on your customers to make sure there are no queries or whether they received their invoice can be greatly appreciated and have a positive impact on your DSO and trading relationship.
- Keeping Track
Keeping track of financial changes with your customer and even your customer’s customer is the best way to minimise your exposure to bad debt. Understanding when financial changes happen and why will help you to react quickly and minimise your exposure to bad debt. A good credit reference agency should have a service to support you with this.
- Creating Boundaries.
Building great trading relationships is crucial for any business, however, it’s just as important to understand when your customer is using your goodwill as a delay tactic on an overdue balance.
- Start Your Collections Process Sooner.
Reacting quickly to an overdue balance can be vital, with insolvency rates increasing, leaving your overdue balance for an extended period of time can result in a bad debt. Contact details can also change in that time frame and you may be unable to contact your customer.
- Observe and Act On Anomalies.
Have you heard rumours or is your customer unusually paying later than normal? These can be signs of a company that’s struggling to manage its cash flow. Reducing your credit limit, understanding how the company is paying other suppliers and beginning your collection process sooner, may reduce the risk of a bad debt.
- Is Your Invoice Working For You?
Does your invoice have all the information needed for your customer to make payment? Ensuring that payment terms, bank details and contact information are on your invoice can mean that should a query arise then it can be dealt with efficiently.
- Regularly Review Credit Control Processes.
As your company grows and develops, your credit control processes need to develop too. If you have noticed an increase in bad debts, is there something that can be changed within your due diligence? Are you reacting to the information received?
Our Head of Operations, Laura Humphries gives her take on how to minimise debt & maximise cash.