The importance of Credit Control to your business

The lifeblood of every business is a healthy cash flow. Bad debts are sometimes a result of poor credit control and can harm business cash flow the most. A good credit control policy maintains a smooth cash flow. Credit is a two-way function. Your suppliers give credit to you and you give credit to your customers. If your customers do not pay on time, you may have difficulties paying your suppliers on time. A good credit control policy ensures that your customers pay on time, your suppliers are paid on time, your cash flow remains vibrant, bad debts are not generated, and business success is facilitated. Herein lies the importance of credit control to your business.

Key Factors of Credit Control
Know your customer. Offering credit is like lending money. As you do not lend money to total strangers, similarly, you should not give credit to unknown customers. You can make them fill credit application forms and get online credit ratings by using the services of a credit reference agency, to check the credit worthiness of your customer.
Order details. The details of the order should be correctly noted down and approved by the customer.
Invoice promptly. Delays in invoicing result in delayed payments. Keep the invoice simple to understand, containing all the relevant details. Some businesses need statements of outstanding invoice payments, hence send the statements on a weekly or a monthly basis.
Enlist the services of a factoring provider. Some finance companies offer factoring services, which can be provided on either a disclosed or confidential basis. The advantage of using a factoring service is manifold, which includes improvement of cash flow, and chasing of debts. The entire credit control exercise is provided by the finance company on your behalf and this ensures that invoices are paid on time. You are also free to concentrate on getting orders and fulfilling them, rather than spend valuable time chasing payments.
Chase payment. If you do not want to use the services of a factoring provider, then follow up with your customers by phoning them and making personal visits. Certain customers may make excuses for not paying. Keep them high on your chasing list.
Update the stop list. Inform your employees of the latest stop list to prevent further credit being given to late payers.
Send Claim Letters. After your invoice is due and not paid, send Claim Letters to build up your case, if legal action is required at a later stage.
Maintain a good relationship. A good positive relationship ensures timely payment. Before taking legal action, speak to the managing director or the finance director explaining your situation.
Take legal action. A good credit control policy is formulated to avoid legal action. However, as the last resort, opt for legal action, if every other recovery attempt fails.