6 Tips for Better Credit Control

BROMSGROVE, U.K. - Oct. 9, 2014 - PRLog -- Earlier this year the Telegraph reported that the average UK SME is owed £11,358 according to data provided by Sage Pay. This adds up to a staggering £55 billion UK-wide, following a surge in increase. The survey also found that 67% of smaller organisations still use paper invoices and spend up to two weeks per year chasing invoices. 1 in 10 also reported that a third of invoices are paid late, causing cash flow issues.

The survey didn’t explore why so many firms are still reliant on paper and postal methods, but it could potentially be a contributing factor to the delay experienced by some. It did, however, highlight the prevalence of outstanding payments being the norm. You certainly won’t be alone, and struggling payers are seen in a more sympathetic light. It also referred to ‘delayers’ not serial defaulters, and it is important to distinguish between the two.

Remember to thank prompt payers – If it’s down to the ‘carrot vs stick’ argument, it’s useful to note that the former can build the foundation of a good buying relationship. Some organisations show their appreciation financially (x% off the amount if paid with x days), but sometimes all it requires is a quick phone call to their accounts department to simply acknowledge the payment with a thank you. It paves the way to be on first-name basis with your customer and hopefully decreases the risk of having issues in the future.

Setting up for success – You’ve heard it all before, but ensure new customers are supplied with a copy of your terms and conditions, and encourage them to read through them and ask about any points they might need clarifying. Most invoices issued clearly state agreed credit terms, and ensure if the customer has used a purchase order number that it’s stated on the invoice for ease of reference. It’s common to supply new customers with T&C’s, but taking the small amount of time to assist them in understanding it is a different thing entirely.

Say what you mean, mean what you say – Some firms advise that as there is no longer a stigma of debt, there should be no reluctance to chase small amounts owed and ‘get tough’ to obtain a result. Not only can such an approach damage client relationships and burn bridges, it completely disregards a vital step – communicating properly with your customer. A courtesy call or email to see if there’s any disputes or confusion to iron out should be an early part of the process. A proposal of legal action should only apply when all other methods have been exhausted, after you’ve distinguished between ‘can’t’ and ‘won’t’ pay. On the flipside, making severe warnings without intention to follow up might discourage the customer from taking the matter seriously.

Be choosey about offering credit – Larger organisations may expect credit terms as standard, but don’t rule out performing a credit rating check before giving the go-ahead. Some companies will ask for a reference to confirm basic identity information (such as trading addresses) and previous payment history.

Allow for flexibility, and understand your customers – An independent bakery will have a different payment process to an international bank, and a bank will undoubtedly be different to a governmental organisation or local authority. Larger organisations will often only process payments once a month, and local authorities may have a complex chain of approval and processes.

Ask for help – If you’re unsure of your legal positioning, ensure you keep records of communication and speak to a specialist to determine the best course of action. At this point, you may simply want advice on possible outcomes, which is where Controlaccount can assist. We can help you devise a strategy to deal with your outstanding accounts where you have tried all of the above – from carrot to stick – and are still left with monies outstanding.