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Is there really an art to successful credit control?


The latest Federation of Small Business Member Survey for Wales 2012 emphasised the fact that across the board in Wales businesses, irrespective of type, are reporting an increase in late payment of their invoices


A


s solicitors specialising in the debt recovery field, we often take for granted the service we provide and so decided to ponder ‘is there


really an art to successful credit control?’ and how can businesses irrespective of their size reduce their aged debts with a view to bringing their customers back in line with their invoice payment terms. When we considered recent discussions


with our new and existing clients, and reviewed instructions and outcomes it became quite clear. We can state quite emphatically ‘Yes – there is an art form to successful credit control’! There are two key elements in any


successful credit control operation – knowledge and systems. So, what do we mean by knowledge?


Knowledge can be broken down into two main areas: 1. The first is knowledge of your client, use Credit Application Forms wherever possible, carry out credit checks on all new customers and periodically on existing customers. Ask who deals with payments of their invoices and their internal processes for payment of invoices and find out when they carry out their payment runs. This will enable you to better tailor and synchronise your credit control efforts with their accounts procedures. 2. Your sales staff need to know your businesses company credit policy and crucially that a sale is not a good sale until the invoice is paid. The more information they are able to gain from the customer at the start of a trading relationship the more beneficial it will be should credit control be needed. Remember ‘Knowledge is power’. For example, why not retain a new client’s bank


details (a copy of a cheque will do) so that if the relationship does go wrong you can hold information to enable specialist solicitors to freeze your customers bank account; a process that is surprisingly quick and inexpensive. Systems: Be systematic in your approach. It is vital


that any business’ credit control procedures in today’s economic climate are systematic, giving a member of staff a few hours on an ad hoc basis to chase outstanding invoices is unlikely to be successful. Current economics dictate that it is vital that your invoice is at the top of the pile come customer payment runs. Being systematic means having stringent


processes in place and adhering to them, the last thing you want is to give your customers the impression that it is okay to pay your invoice late as you only chase every month, two months etc.! To avoid your invoice being pushed to


the bottom of the pile, issue invoices as soon as the sale/service has been completed, check with the customer they have received the invoice and that there are no issues with the same and confirm that you can expect payment in the agreed terms. As soon as the invoice is overdue, credit


control should and must begin immediately. An ideal initial procedure for chasing payments is a gentle reminder, whether this is a telephone call, copy invoice marked payment overdue, a statement or a polite letter, anything so long as the customer sees that you are diligent in securing payment, it should gently keep them focused on payment of your invoice. Should the invoice remain unpaid after seven days, attempt all forms of direct communication with the customer to get dialogue going about the


outstanding payment. In the event this does not result in


payment, send a final written demand stating that you will refer the matter to solicitors if the monies due are not paid. It is vital you proceed with any warnings


given as not to do so also gives the wrong impression. Sending a solicitors letter increases the likelihood of that invoice making it to the top of the ‘to be paid’ file as the client understands that there will be other extras to pay over and above the outstanding invoice if action is not taken immediately, eg interest and late payment compensation. Good credit control has obvious


business advantages and helps prevent losing customers by maintaining a consistent approach to them. It also helps all debt recovery actions commenced as the momentum you will adopt in credit control can be continued swiftly in the debt recovery process, ‘if you snooze, you lose’! In times when late payments are being cited as the reason that a lot of businesses are reducing staff or closing it is those that have a your good credit control process that will survive and thrive. If you want to know more or would


simply like to discuss your current credit control or debt recovery process please call Debra Spedding on 01633 760701, or email speddingd@hevans.com. Deb will enjoy sorting through and improving your credit control processes, and will come and visit you to discuss your needs on a no obligation basis.


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