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Getting on top of credit control

Written by: Julie Stanford

Article Overview: Effective credit control is not just about chasing money that is owed to you. You need to get it right from the start of the sales process.

Getting on top of credit control

Maximising cashflow and avoiding bad debts are two key objectives for any business. Credit control is vital in achieving both, but it is not just about chasing overdue invoices, it’s about getting the whole process right, from receiving the order to collecting the money.

10 ways to improve your credit control

1 Ask your customer to complete a credit application form
Obtain all relevant contact and bank details, including registered office and registration number if it’s a limited company, or full names and addresses of all partners if it’s a partnership. Make sure the form is signed and dated by the customer.

2 Check the creditworthiness of new customers
Get credit references from your customer’s bank and key suppliers. Use a credit reference agency
for a more comprehensive report.

3 Agree payment terms in advance
Make sure your payment terms are clearly stated both verbally when orders are placed and on all paperwork that follows. If you charge interest on overdue accounts, this must also be stated
at the same time.

4 Send your invoice when goods are dispatched
Invoice within 24 hours of a chargeable event. Remember, nothing happens until your bill gets
into your customer’s payment process. The sooner you invoice, the sooner you get paid.

5 Check all invoices are sent to the correct address
The invoice address can often be different to the delivery address.

6 Send a statement of account
Customers generally pay on time, or when reminded. Sending a statement showing overdue invoices will act as a reminder and usually prompt payment.

7 Develop a ‘friend’ in your customer’s company
This can prove invaluable when you’re chasing unpaid invoices.

8 Chase late payers promptly
Phone overdue accounts, chasing the largest and oldest debts first. Take prompt action — it’s cheaper than escalating overdraft interest. If there is no response, write a formal letter, followed by a final reminder letter seven days later advising that legal action will follow.

9 Don’t allow customers to exceed credit limits
Credit limits are set for a good reason. Don’t allow them to be exceeded without your permission.

10 Set up a ‘stop list’
Make sure your staff know which customers are on ‘stop’ and do not allow any more orders to be taken without payment of outstanding invoices.

Remember: keeping control of the money flowing into your business not only improves the health of your business, it has a pretty good effect on your own health too!

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Related Forum Posts
rebuilding credit - In order to build credit you need to borrow and payback responsibly. If you have built-up many debts, re-financing to improve cash flow would be a great way to get control over your debts. It's hard to borrow when you have previous bad credit, so the best way to repair your credit score is with secured loans. For example you can pledge cash to the bank and get a credit card that is cash secured, use the credit card and make sure to make monthly minimum payments on time. In Canada you could take out an RRSP loan from a bank, which is secured by the RRSP investment. There is a tax benefit and it helps to improve your credit score.
Re: Ever been scammed... - a credit check runs for about $25 here too. Have you guys ever wondered why we get so many pre-approved credit cards on the mail? I've heard that car dealers sell your credit reports to those companies.
credit cards - Nana, you can get a credit card! Get a Secured Credit Card. It's a Visa or MasterCard which is a hybrid of a chequing/credit card. There are two types: 1. You put in an amount that you would like to have as your credit limit in $500 increments as security and you you can either pay in full each month or make minimum payments 2. You can have a credit card linked to your chequing account and you can spend only has much as you have in your chequing account. I recommend #1 and they both go to improving your credit limit.
toronto angel group - The Toronto Angel Group is a very hard group to get into. You have to have a very stable and viable business plan and they like to stick their fingers into your pie and they are usually looking to invest big bucks. Which means that they usually want to take control. If you look deeply into these groups you need to know someone or have a very good idea with potential clients backing you up. In my opinion, other sources of financing will give you better control of your business or learning to ask for the money upfront. One of the things I found is that new buisness owners are afraid to ask for the money upfront but every other business expects you to unless you have a proven credit history. Good luck with the Angel Investors
Unsecured Lines of Credit - I have found that building a strong business credit profile allows for many commercial credit lines that I don't have to personally guarantee. Within 3-4 months I have recieved credit lines under my business name with Home Depot, Lowes, Staples, and Dell Computers. I wish I knew about business credit when I first started my business.


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