All you need to know about credit control

28.04.2021

We’ve all been there. You send an invoice to a customer including all relevant payment details, but when you check your accounts on the due date, the payment has not been made. Everyday that passes affects your businesses cashflow. How can you improve credit control in your business?

Firstly, let’s define credit control. Credit control is the system used by a business to ensure that customers are given credit if they are able to pay, and pay on time. This means that you are allowing customers to pay for your goods or services some time after they have been provided or delivered, unlike a shop, for example, where a customer must pay for what they want before leaving. Commonly, when a business gives credit, they allow up to 30 days for payment, meaning the customer has 30 days to pay you from the time you issue the invoice. In certain circumstances customers may be given longer periods such as 60 days. Credit control is the action of following up with customers and ensuring that they pay under the agreed terms.

Ineffective credit control can lead to huge cash flow issues for any business as accounts are not cleared. 

Here are some tips to ensure faster payments & better credit control for your business.

Establish a good & trusting relationship with customers

Gaining new customers is exciting for any business, but it’s important to establish the right relationship from the get-go, and that you start off on the right foot. Decide who you should offer credit to and build a trusting relationship over time through regular and prompt payment.

Use software to your enable effective credit control

Having the right software solution in place can have a huge impact on your business, and can allow your accounts department to operate in a much more efficient manner. Here at Herbst we offer a full credit control module, integrated with your accounts. This credit control functionality kicks in at order stage, meaning you can allow management to control the risk. Keep a record of your correspondence with the customer, enforce restrictions on overdue accounts and manage difficult accounts effectively. You can learn more about our credit control solution here.

Understand the customers processes

Card, cash, transfer? People pay their bills in different ways and many have different processes which can cause delays with payments. When sending an invoice, be sure to get the contact details of the person responsible for payment, so that you can confirm:

• What their sign-off process is 
• What kind of payment method they prefer
• Do you need to be added to a list of preferred suppliers
• Any extra information that needs to be included on invoices

Send reminders before payment is due

Invoices are often paid late due to simple reasons such as absences or human error. By sending an email or SMS before payment is due you can avoid some of these problems before they can become major issues. Whether it is a week, two weeks or a few days beforehand, work out a system that is effective for you. Automated emails and SMS messages are also something that is part of our integrated credit control solution here at Herbst, allowing you to communicate effectively with customers directly from your software platform.

Keep a record of communication with your customers

Keeping a trail of communication with your customers can be vital should certain queries arise around payments. This can be someone losing an invoice, the original contact person leaving the company etc. Keeping a record of all emails and calls means that you have the necessary information should any kind of dispute arise.

Evaluate existing customers

It’s important to continuously evaluate the relationship that you have with your customers. For example, if their credit score is good and they earn your trust through regular prompt payment, you can offer more generous payment terms.

Should a customer’s credit score decline, you may need to adjust their payment terms to avoid unnecessary risk.

Should you have any other credit control related queries or questions relating to software, you can contact us at any time, we’d be happy to help in any way we can.