Credit control is a key factor in the day-to-day running of a business, as it can impact many different aspects such as cash flow, your ability to pay your suppliers and staff, your relationships with your customers, and your reputation. By implementing tailored procedures to help manage credit control, business owners can enjoy peace of mind knowing that they can maintain a strong cashflow position. 

What is credit control? 

Credit control is a system put in place to make sure your customers pay invoices on the due date. This works by evaluating how likely customers are to pay you on time by completing background checks. Once a customer is deemed suitable for credit, they are usually given strict payment terms. 

Credit control procedures involve sending statements, payment reminders, making sure invoices are accurate, and aged receivable reports. Aged receivables reports show any invoices which are outstanding from customers, how old the invoice is and, hence, when payment should be expected and if it is overdue. 

Why is credit control important? 

There are some important business considerations around credit control. Major cashflow issues can be caused if payment isn't received on or before the due date. If payments are late, this may lead to businesses having insufficient funds to pay their suppliers and staff and run the business. 

If credit control procedures are insufficient and customers do not pay, this could lead to involvement of debt collectors which can be costly to all parties. Businesses may then be unable to negotiate payment terms with suppliers as a result, due to reputational damage. 

On the other hand, if a business’s credit control is efficient then money will be received on time and can then be used in other areas of the business. Building good relationships with customers due to increased trust can also lead to networking and referrals. 

How can credit control be managed? 

Businesses should ensure customers are properly assessed before giving them credit terms. Having clear payment terms on invoices and having robust procedures in place, such as issuing regular statements and reminders and placing overdue accounts on hold, can help to improve recovery of funds. It can also help to have a reliable customer contact when sending statements or payment reminders, as it ensures they are receiving these promptly. 

One easy win to manage credit control is confirming with customers that they have received your invoices, to remove the possibility of clients saying “We never received that invoice” as a reason not to pay.  

Our Outsourced Finance Services team can provide credit control services by supporting with maintenance of trade debtors (unpaid invoices owed to you by customers), chasing customers for payment, and issuing statements. We can also analyse how quickly funds are received from customers on average, and use this information to forecast cashflow. This can be vital to ensuring that there are sufficient funds in place to pay suppliers on time.  

Recovering funds from customers  

Many businesses can struggle with recovery of funds from customers and what procedures to follow when they are having difficulty with this. We can help relieve the pressure of this process by supporting business owners as their trusted advisers. We can become the main point of contact for your customers, streamlining the process and reducing the time burden on you. This will enable you to focus on running other areas of your business. We work with a variety of clients on these services, ranging from start-up organisations with minimal sales transactions to established businesses with a turnover in excess of £5 million per annum.  

Automating credit control 

For businesses looking to keep the management of credit control in-house, our Digital Transformation team can help you design and implement a suitable credit control procedure, tailored to your business and customers, which ensures that funds are recovered efficiently. We can carry out a thorough review of the current processes in place and provide suggestions on how to streamline and automate these.  

This can include creating automatic statement reminders directly from the accounting software, such as Xero, setting up flags in the system if there is a change in days to pay, and establishing automatic links to payment apps, which will allow customers to pay their invoice by simply clicking a link on receipt of the invoice. This can significantly improve the average time taken to receive payments and ensures the process remains straightforward for customers, which is important in an environment that is constantly changing. We can also ensure that the right controls are in place to help minimise risk such as fraud. 

Get in touch 

For more information on credit control and how we can help, please don’t hesitate to get in touch with our Outsourced Finance Services team for a chat.