UK: Credit Control, An Essential Business Ingredient

Last Updated: 20 April 2018
Article by Hazel Wells

Wouldn't it be great if every client of your business was a prompt payer?   You could get on with your business without having to spend time on the phone, chasing via email and getting increasingly frustrated by the lack of response.

In reality, we all know that getting paid on time is not as simple as it should be, and for the growth and continuation of your business, the recoveries of monies owed is an essential ingredient.

Credit control is a bare basic necessity in both the day to day running of your business and its future growth; this is especially true for small to medium enterprises (SMEs). In its simplest form, credit control is where credit is only given to customers whom you know will pay, and pay on time.

Standard payment terms

Payment terms are usually set out in your contract or terms and conditions - it may differ for each customer, depending on the products or services they are purchasing and the type of business they are.  However, most SMEs have standard terms of business and standard payment terms. This is something you may want to change.  Ideally, each potential or new customer should be assessed on their own merits and credit limits adjusted accordingly to avoid any further payment issues. 

Running a small business isn't easy, particularly when you are starting out; there are always challenges to overcome: people and resource management, marketing and business development, data protection and privacy and meeting regulatory requirements, the list goes on...

Let's be honest, credit control is not as exciting as winning new business, producing client work or creating new products. While it may be tempting to take credit control half-heartedly or put it off for another day and stick to the bits you enjoy, you might be placing your business at risk and creating a plethora of very time-consuming issues.

Financial challenges like debt and cash flow can cause serious, detrimental hardship.  In worse case scenarios, businesses have gone under because of cash flow issues due to unpaid invoices and bad debt.   It is, therefore, a fact of life for companies that cash flow is fundamental.

At the very minimum, it is essential to ensure;

  1.           You collect invoices on time.
  2.           Have stringent procedures in place to do this efficiently and effectively.

Cash flow

Late payment and uncollected invoices are a big problem for SMEs in the UK - a build-up of these will eventually affect your cash flow, which will impact upon the general performance of your company as a whole and take you away from the more exciting aspects of your business.

Getting advice when it comes to credit control makes sense.  It is a specialist field, which requires the right knowledge, experience, systems and processes to be in place. Good credit control procedures ensure monies move in and out of your business at the time it is supposed to, allowing you to concentrate on the day job.

Credit control is not just about chasing debt, it's also analysing and assessing the risk of new customers from day one, and deciding what (if any) credit should be given.

Time and time again we see the impact that non-paying customers have on our clients' business. We see owners, accounts employees or credit controllers become so frustrated and stressed as they feel there is nothing else they can do.

Good advice and support will allow you and your employees to feel less pressure, help improve your bottom line and get on with the business of doing business.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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