Credit control is the process of making sure that your customers pay you – and ideally on time.
Many businesses allow their customers to buy goods or services on credit terms. Many business-to-business companies supply their products and services on credit. Retail businesses that sell to the general public may not allow goods to be obtained on credit, and rely on the credit card companies to be responsible for non-cash buyers’ payments. However, some large retailers do offer credit terms to their customers.
Here are some tips to help with your credit control process:
Issue invoices promptly
The first credit control procedure a business should do is to issue invoices promptly. As soon as goods are dispatched or services delivered, then an invoice should be raised.
Invoices need to clearly state the credit terms, particularly the credit period, which could be 14 days or 30 days.
Offer different payment methods
Though many businesses still pay by cheque, as part of credit control, most businesses need to offer a multiple of payment options. It can be an idea to print the company bank details on an invoice as some companies prefer to pay by direct bank transfer. PayPal is also a popular payment choice, so perhaps include a PayPal address on invoices. Telephone payments via a credit or debit card could also be an option.
Credit checks
Before accepting a customer for credit terms make sure you perform a credit check on them. There are several checking agencies that for a modest fee will check a business’ or an individual’s credit status. If the business finds that the customer has a bad credit record then asking for payment on delivery or before works start can be considered.
Set initial limits
Some businesses set a maximum credit amount a new customer can have. This can be increased once the customer has a history of paying on time.
Chase up late payments
If a customer does not pay on time then send out an email or letter. If this does not lead to payment then talk to the customer in person on the phone, or go and meet them to discuss the issue.
Debt collection agency
For very late payments consider using a debt collection agency who will collect payment for you.
Outsource credit control
Credit control can be time-consuming. It is a good idea to outsource credit control to an outsourced accountancy service who will take care of collecting the money owed to your business cost-effectively.