Credit Control Best Practices: Securing Your Company’s Financial Future

Credit control is a term that refers to the process of managing customer credit. This process is important for any business, as it helps to minimise the risk of bad debts and ensure that payments are received on time. Effective credit control can be likened to a protective barrier that acts to detract and deter bad debtors from engaging with your business. To put it a different way, managing credit risk can be the difference between your company enjoying steady cash flow or feeling the burden of financial instability. By implementing best practices for credit control, you will not only protect your company’s finances, but will be better positioned to build strong, lasting relationships with your clients. Let’s take a few minutes to look at some of the credit control best practices that can help you secure your company’s financial future.

Establish a Clear Credit Policy

Before you start offering credit to any customer, you should ensure that your business has a robust credit control policy in place.  This crucial document should stipulate your payment terms, including due dates, interest on late payments, and any discounts on offer for early settlement. A credit control policy is the backbone of any financially stable business and a measure for preventing misunderstandings further down the line.  By clearly communicating your credit terms and conditions to clients when they first engage with your business, you can take a streamlined approach to credit control and establish clear boundaries with your clients from the outset. Once a client has signed on the dotted line of a credit agreement, you are far less likely to enter into a contract with a poor paying customer.

Assess Creditworthiness before extending credit

Not all customers are suitable candidates for credit, so it’s essential that you perform background credit checks using a reliable credit agency. For high-value contracts, you might wish to consider requesting trade references or a personal guarantee.  In doing so, you can hopefully avoid extending credit to individuals or businesses that might struggle to pay.

send invoices promptly

One of the simplest ways to improve your credit control is to adopt an effective process for invoicing.  It is good practice to send out invoices immediately after any goods or services have been delivered.

Ensure you use an invoice template that outlines all essential information, such as the invoice number, your payment terms, and bank details.

Monitor Customer Accounts

It goes without saying that a proactive approach to credit control is better than a reactive one.  You should monitor customer accounts closely, so that you have your eye on the ball when overdue payments arise.

A system of reminders, whether through email or phone calls, can help your customers keep on track with their payments.  If you are using digital accounting software, you may be able to initiate an automated process for sending out payment reminders.  However, if you do choose the automated route, be sure to continue to review customer accounts on a regular basis so that you are a-breast of any problems before they escalate.  Early intervention is critical in preventing small debts from becoming larger, harder-to-collect sums.

Contact Us

If you would like to put your business in good stead for the future, then please give us a on call 01603 319034 or email: info@jacksonscrs.co.uk for a free no obligation chat about your needs and how we can help.