If you’re concerned about late payments and their impact on cash flow, it’s time to take control of your credit. Find out how to improve your credit control processes in this guide.
Managing your credit control is essential for any business. If payments are late, this can have a huge impact on company finances. Setbacks to your cash flow are likely to affect other aspects of your business too, and this can easily spiral out of control.
Sadly, that’s not unusual for SMEs in the UK, as 48% of invoices from these businesses are paid late.
Fortunately, there are some simple steps you can take to improve your credit control. From establishing a clear policy to automating credit control, following these steps will protect your business and secure your cash flow.
For your credit control to be effective, it needs to be cohesive and consistent. That’s where a credit control policy comes in. By having a specific policy, your staff will be able to implement the same procedure across the entire business. This helps you to hold staff and customers accountable for invoices.
Each stage of the process should be covered, from sending out prompt invoices after order fulfilment to charging interest on late payments. You’ll need to continuously update your policy as your business develops, anddevelops and ensure that all departments and customers are aware of its contents.
Before offering credit to a new customer, it’s best to use credit checks to evaluate the risks. You can use credit checking tools or ask an expert to explore the customer’s credit history. Credit checks will give you insight into a customer’s financial history, including any issues with late or missed payments. Even once you’ve onboarded them, it’s important to occasionally review their credit details to ensure nothing has changed.
The clearer your processes are, the more likely you are to receive a prompt payment. Provide details of your credit terms on your contracts and invoices. Your invoices should also include details of the expected payment date, along with how and where to pay.
Late payment emails should explain how you will take care of credit control, including any interest you will charge, as well as any action you’ll take if the invoice is not paid.
Aside from ensuring your invoices are clear, you should also ensure they are sent out quickly to your customers. As soon as the work is completed or the goods are delivered, aim to send off your invoice straight away. Delayed invoices lead to delayed payments. Additionally, double check that the details are accurate, and confirm with your customers that they have received the invoice successfully.
An ERP such as Profit4 can offer automated invoicing…
Developing a rapport with your customers can make a difference to your credit control. If customers have a good relationship with your business, they will be more likely to pay on time. You can foster a stronger relationship through the credit control process by speaking with their team to discuss any issues, and sending polite follow-up emails when chasing up any debts. Add reference to automated emails sent through Profit4 and use of CRM to manage customer relationship.
Inter-department communication is essential for robust credit control. It’s not just your accounts team who needs to be aware of outstanding debts and unpaid bills. You should ensure that all your team members are aware of your credit control process, as well as any issues with customers’ accounts.
For example, your sales team should be aware of customer debts, so that they can discuss them, or even refuse credit, should the customer place another order. ERP software, such as Profit4, provides customer details at a glance, so your sales team will always be up to date.
Automating credit control can give your team more control over unpaid invoices. This will allow your team to set up clear workflows, which will automatically trigger emails at preset intervals to chase up payments from customers. In addition to this, it can also create events in team members’ diaries to make follow-up calls. Ultimately, this cuts down the time your team spends on chasing late payments, so they can focus on other tasks.
With Profit4, you’ll also have access to all the information you need to maintain robust credit control. That includes an overview of your workflow stages, so you can instantly pinpoint the most high-risk clients.
You’ll maintain complete control over the process, so you can choose which customers need to be placed onto a workflow to receive automated emails, and you can assign different email templates to each stage of the workflow. That creates a truly bespoke credit control system, with full automation to free up your staff.
Whilst you can try your best to encourage on-time payments, not all customers will comply. It can seem difficult to chase up payments, as you might feel concerned about damaging important customer relationships. However, the bottom line is that as a business you are entitled to be paid for products or services provided – and late or missing payments can set your business back drastically.
You don’t need to damage your relationship with customers. Instead, take a professional and proactive approach. Speak directly with the staff member who is in charge of paying your invoice. Provide details of your credit control policy, including interest (applicable under the Late Payment of Commercial Debts (Interest) Act 1998). If mediation doesn’t work, then you can consider taking legal action or handing your case over to debt collectors.
Credit control processes don’t exist in a bubble. Every aspect of your business, from accounting to sales, is involved in ensuring your invoices are paid by their deadline. ERP software allows your business to take a truly integrated approach to credit control.
Profit4 features an all-inclusive suite of cloud-based ERP tools, including inventory management, finance and accounting, sales and more. With Profit4, you’ll have an at-a-glance view of your business, including incoming orders, stock levels, and unpaid invoices. Your team will be able to automate many key manual tasks, including raising purchasing orders, sending credit control emails, and more.
