9 Best Practices for Improving Credit Control Process

The failure among start-ups and small businesses especially during this pandemic has been mostly contributed by the cash flow problems caused by late-paying customers and bad debt. Businesses must set up implementation efforts over a clear credit control process for enabling themselves to grow even under threat. This article is aimed at acknowledging businesses of the best practices for the improvement of the credit-control process policies and procedures. Businesses must be crucial in implementing clear and coordinated efforts for credit control. Late customer payments heighten risks for businesses of getting into bad debt, but rectification through reminders enriching a realistic timetable for ensuring no occurrence of payment delays. With a timetable that conclusively includes all stages required for completion or adherence to the whole professional accounting team within the business. The vitality of credit terms is proved when these are based on the requirement of the supplier’s payment. OURS GLOBAL’s Accounts Receivable process drives the prior establishment of these terms, making businesses shift their attention throughout these stages involved in chasing payments.   

The credit-control process comprises: 

• Time-to-time reminding of customers over payment schedules after order fulfillment

• Forward reminder letters on overdue invoices

• Subsequent letters for unpaid invoices over 7 days

• Outsourcing debt collections efforts to a commercial debt collection agency 

With the subsequent recording of credit control processes, businesses can ensure awareness of the terms and conditions and, in addition, helps in the reduction of problems that come with late payment events.  

Following are the Nine Best Practices for Improving Credit Control: 

1. Improvement of Customer Credit Management with Extensive Researching

Streamlining the credit-control process through customer researching before offering them credit is an effective way. This credit management tactic is appropriate mainly because of the lower costs of producing credit reports. Only some of such costs can be offset by classifying clients on the degree of risk and focusing their attention on researching these.  

After attaining all required business information ranging from full trading name, registration number, addresses, and key contact details, businesses can easily check credit through various channels. Informing businesses of the degree of safety with each customer assures the guarantee of credit that enables them in making informed decisions about the terms and conditions of the respective order.

2. Positive Working Relationship

Debt collection endeavors always have negative sides but the driving credit control process doesn’t need to require threatening of customers. With positive client relationships through positive & clear channels of communications, businesses can ensure an effective credit control process. Making courtesy calls for confirming paperwork receipt or prior invoice due date, helps in the showcase of friendly and professional, enabling clients to enjoy fruitful experiences and become aware of opportunities for explaining their queries and situation. 

3. Quick and Accurate Invoicing 

Quick and accurate invoicing helps the whole credit control process. Incorporating appropriate steps for helping businesses increase the efficiency of credit control processes. Forwarding invoices after fulfillment of orders, emailing them rather than posting, accurate addressing for ensuring the right client, and checking for mistakes are advised. 

4. Encouraging Early Payment

Encouraging customers for early payment makes it possible for clients for the same. Stating official banking details must be stated on invoices as well as accepting payment through varied channels particularly online payments. Incentivisation of client payment encourages early payments. 

While offering incentives, awarding early settlement discounts for high risky clients, if they pay within the stated credit terms. Proving beneficial, some customers can pay the majority of invoices on time. This will also have positive impacts on profit margins by incorporating incentives into the pricing structure.   

5. Compilation of Watch Lists 

The consequences that happen with late payment invoices must never be ignored. Late payment from specific customers is critical to be monitored and must be considered to be on the watch list. This approach must be driven for late-paying customers will ensure businesses for undertaking the necessary due diligence while selling in the future. Customers will have legitimate reasons for the failure in invoice payment and must not be afraid in punishing persistent offenders. Continous ignore of clients via calls must be replied with a solicitors letter for spurring them into action.   

6. Forecasting Cash Flows and Up to Dates

Reminding time after time of forecasting results can be a reliable source of information, will infer average revenue expectations. as well as information on minimum funds to clear predicted debts. With a clear understanding of the debt and whether it will exceed the credit terms, businesses can easily make improvements or take action on already existing issues. Prior to the forecast of cash flow, it must be kept up to date for avoiding surprises in the future.

7. Trust your Business Instinct

Hearing customer troubles of how they failed in paying their invoices can be helpful. And it is up to businesses for questioning client reasoning and ask them for providing documentation if possible. Customers who delay their payments, again and again, must be questioned with reasoning. Assigning a specific time frame, or even calling them back at a later time to shorten the delays. Prioritizing trickier clients from track records of customer invoices will also ensure on-time payment.  

8. Easier Payment

Businesses must give the customer more varied options as alternate methods of payment such as cheques, BACS, credit/debit card, cash, etc.

Awarding customers with a lot of options will increase the on-time payment of invoices. 

9. Clear and Consistent Terms and Conditions 

Unclear terms and conditions bring forth mistakes and enhancing the same will ensure businesses initiate working with newer customers with clear and consistent terms outlined with all terms regarding invoice payments and for ensuring optimum transparency. Making clear terms for existing customers will also support following the side of the process. 

Businesses must also initiate amicable relationships through consistent approaches from both parties. Clearly stating tolerance policies on late payments and the initiates to be taken for the occurrence of late payments. Keeping honest customer relationships helps to identify unreliable customers in due course. 

Thus with all these best practices, businesses can dramatically optimize the customer percentages who get late of their invoice payments. Businesses that follow such steps can make sure they can express the options that are provided as clearly as possible. Invoice finance can also be cutting down the risk of physical assets by enabling them to receive an advance on payments, already due to receive. OURS GLOBAL’s Accounts receivables services help businesses to collect payments from their customers much efficiently and quickly. get in touch with us for the wide range of invoice financing options that could help your business.