10 compelling reasons why you need Credit Control
Let’s face it, late payments and the debt collection process can be quite stressful for any business, whether a sole trader, SME or a larger outfit. With a recent study confirming that SMEs in the UK are owed £14.2 billion in late payments, it is unlikely that the issue will be going away anytime soon.
Here are 10 reasons why you need to have a robust credit control procedure in place:
1. The impact of late payments can be severe, sometimes resulting in insolvency.
2. Late payments are one of the main reasons for cash flow difficulties in any business; a good credit management system will help you avoid cash flow difficulties.
3. You avoid a situation where staff may need to take home a reduced wage in order to maintain cash flow in the business. This does happen. A recent study conducted by the BACS payment schemes ltd revealed that approximately 20% of company directors have taken a salary cut to maintain company cash flow.
4. Limited cash flow also limits the amount of cash available to place further orders with suppliers.
5. You minimise the extent to which you need to rely on overdrafts or other credit facilities, some of which can have quite high-interest rates and other charges.
6. Debt collection can be very time-consuming. Staff can easily end up spending hours on a daily basis chasing late payments rather than spending that time more productively on the business.
7. If the debt collection process is not conducted properly, some debt may eventually have to be written off which reduces profitability.
8. Relationships with customers and suppliers can break down if the debt collection process is not handled properly.
9. The case can end up in court if it is not managed properly.
10. Further complications can arise if the Debt Collection Agency being used for any outsourced credit control is not suitably qualified.
Here at First Capitol, we offer a full range of debt recovery services with highly experienced staff and advanced IT systems to support you every step of the way. Contact us today!