Credit Control Policies & Procedures For Small Businesses
Lots of businesses struggle to get money they're owed because of poor credit control procedures. Here's some of the common mistakes that businesses make and what should be done to take better control.
What is credit control?
Credit control is anything you do to reduce the wait between supplying a customer and getting paid. Your customer owes you, so you’re extending them credit – but you’re trying to do it in a controlled way.
Credit control is a delicate balancing act. While it’s important to get your money as soon as possible, customers might leave if you’re too aggressive.
Why you need a credit control policy
Not many small businesses have credit control procedures when they first start. They just issue invoices and hope for the best.
But fewer than half of invoices are paid on time and, before long, that takes its toll. Cash flow can become an issue, and chasing payments is a pain. If that sounds like you, it would probably help to develop formal credit control procedures.
Credit control techniques you can use
You could run credit checks on businesses before accepting them as new customers. If they score well, they’re more likely to pay on time. Another option is to change your payment terms so customers have to pay faster. But what about the customers you already have? The ones who would complain if you shortened their payment terms? You could still get your money faster by tightening up your invoicing and collection policies.
Invoicing and payment collection mistakes to avoid
We asked the experts at Chaser for their tips. They have the highest-rated credit control app in the Xero app store – so they know a thing or two about collecting payments. Here, they reveal nine common mistakes that slow down the process for small businesses.
1. Assuming all clients are the same