Know your customer
This is the most important aspect of effective credit control. Before entering a business relationship you must always verify your customer and their ability to pay for the goods or services provided.
Verification is provided through evidence of identity i.e. bank statements or utility bills. You can request trade references from other suppliers to find out if they are prompt payers. You can also carry out a credit check to find out their current status, all of which will help you make an informed decision about how you should deal with the customer, for example should they be providing payment up front for goods or given credit terms.
Robust terms and conditions
Having the right terms and conditions in place, clearly documented in writing and issued before any contract is entered into, ensures all parties understand the provisions of the transaction, their duties, rights, roles and responsibilities.
If you do not currently have terms and conditions in place or you are unsure whether your current ones are sufficient, we are here to help.
Set a credit limit
If you do provide a credit facility use the information you have obtained about your customer from your application checks to set an appropriate credit limit.
If the customer is new, set a lower limit and as you build a relationship and gain confidence and trust in them this can be reviewed and increased accordingly.
If you have any doubts then do not offer the customer credit terms. Instead you could obtain security for the credit that you do offer, or request a personal guarantee from a director of a limited company.
Invoice in an accurate and timely manner
Invoices should be sent promptly and have clear details of the goods or services provided. The customer’s name, address and order number should be included, allowing them to clearly understand the contents of the invoice and very importantly, it should include details of how they can go on to pay.
Implement effective credit control procedures
Your credit control system should track all invoices which are either awaiting payment or are overdue. A timetable and diary system should notify you of overdue invoices.
A telephone call is the most effective and efficient tool to chase an outstanding invoice. Always speak to the person responsible for authorising payment and remain polite and professional throughout the call.
We can advise you and implement robust and effective credit control systems in your business.
Keep a record
It is important that you document and keep a record of all communication that you have with your customer for example copies of any letters issued and details of any telephone calls held. If you are away from the office then this allows someone else to deal with the file. You should also keep bounced cheques as they indicate the customer’s acceptance that they owe you the money.
If an invoice remains unpaid after following your usual credit control procedures we can help you take further action.
Credit control pack
Our credit control pack has been designed with best practice tips and template forms to ensure your business stays on track.
Our pack includes:
- customer credit application
- trade reference letter
- bank reference letter
- request for a status enquiry
- invoice template
- terms and conditions template
- credit control payment reminder letter A template
- credit control payment reminder letter B template
Kick start 2018 with a focused and proactive approach to your business credit control procedures. Give our team a call on 01228 713070 for more details.
Posted: December 31st, 2017