Understanding the importance of credit control is essential for businesses. Whether you are a new business owner or have been in business for many years. Credit control is key to ensuring that your business remains profitable and protected.
With the cost of the living crisis well underway as well as talks of global recession, now is the time for businesses to get a handle on their credit control processes and ensure they can weather the storm.
Here at My Debt Recovery, we understand how businesses can end up in financial difficulty. Protect your business by reading our complete guide to credit control.
What is credit control?
Credit control sounds more complicated than it actually is. It simply refers to the process businesses use to assess whether or not a potential client will pay their invoices on time.
When the word “credit” is used, it is typically talking about finances of any kind. From the cost of services, products where the thing you have purchased is given before a payment has been taken. Think about your credit card, you have purchased something with “borrowed” money. This is the same for businesses.
The word “control” in the terms of credit control is simply the measures you as a business put in place to protect your accounts and finances. You control what risks you are willing to take and prepare accordingly.
How does a business keep track of credit risk?
There are many ways a business can track credit risks. The main task all businesses should take to avoid credit risk is appropriate research. Looking at where a potential client is financially and performing credit checks are essential.
Read more about late payment risks here and how to protect your business.
How do businesses implement credit control?
Implementing credit controls comes down to how your business functions. Ideally, businesses who work on credit term basis should perform reluctant checks before contracts have been signed.
A thorough onboarding process will help businesses implement credit checks beforehand. Not only can businesses perform credit checks, but it may also be an option to include specific conditions with new clients. Such as a percentage payment upfront before any works, products, or services are carried out. This can ensure that a business has some funds to cover initial costs.
Once a client has proved themselves by paying on time, you can then begin to amend the credit terms of future contracts.
Alternatively, businesses can opt to only provide credit terms for up to a certain amount. This can provide security for many businesses, and keep their accounts in check.
What are some tips to manage business credit control?
It is essential that businesses manage their accounts. Managing your credit controls is an easy way to ensure you can protect your business. Some key tips to manage our business credit controls are as follows:
Keep updated accounts
Keeping your accounts systems updated will help you identify where there are any issues regarding your client’s finances. You will be able to quickly identify these risks and begin to put a plan in place should the worst occur.
Improve your invoices and paperwork
It is always a good idea to look at ways you can improve your invoices and paperwork. This involves including the most important information and highlighting any payment deadlines and what could happen if the invoices are not met within the time frame. It is also beneficial for your clients to have all relevant information within easy reach and access.
Improve your administrative processes
Look at ways you can improve your administrative processes. From streamlining your invoices and follow up emails, can help you keep control of your business finances. If an invoice is always sent on the 1st of the month, your client has no reasons to delay the required payments.
Prioritise larger debts
Prioritisation is key when it comes to managing your accounts. Spend the time and resources you have to ensure that your larger debts are paid. Continue working through your debtors from the highest amounts owed to the lowest. After all, the larger sums will have a greater impact on your business accounts.
Many businesses may face financial difficulties in some shape or form. It is important to know how to navigate the difficulties. As a business owner knowing the warning signs that your client is in financial difficulty can help. However, when things turn for the worse, working with a debt recovery agent may be the solution.
Here at My Debt Recovery, we understand the importance of a human approach to debt recovery. Our agents take the time to understand a business’s circumstances and apply the best approach to suit both business owners and clients. Contact our team now for debt recovery assistance.