Why you shouldn’t forget about improving your credit control
Establishing and maintaining credit control is one of the most important ways you can create a healthy cash flow in and out of your business. Especially if you’re a start-up business or SME – late payments from suppliers to clients can be so impactful to your business they could cause you to close. To avoid this risk, you need to establish a clear credit control process, and most importantly, stick to it.
Credit control process
Establishing a clear credit control process is simple in a few steps. Firstly you need to ensure you’re realistic about the ability of your suppliers or customers to pay you, and consider when you need to be paid after you have completed work to ensure that payment for the job doesn’t impact your business operating. Once you set a timetable for this you need to communicate internally and clarify with the teams responsible why having invoices paid on time is so crucial. Be clear with the people you expect to pay you what your payment terms are, the consequences if those terms are missed and then the process that will follow.
Before committing to work with a certain supplier or customer, check their credit history. If you’re worried about their report you might decide it isn’t sensible for you to work with them on this occasion rather than take the risk. Or, you can ask the business to pay a certain amount up front, say 50%, mitigating some of the risk to yourself.
Once work is completed you need to ensure you invoice quickly and with all the accurate and relevant information so the customer is able to pay on time and in full. The more consistent you are with your own duties, the more likely the person or business is to pay you on time, as they understand the consequences if they don’t. It’s also crucial to stay positive and courteous in your exchanges, even when you’re chasing payment, as your customer or client may simply have been busy or mislaid the invoice, yet any hint that you distrust them can sour the relationship.