Credit control is a fierce competition. Too many business’ can’t afford to pay everyone within terms – so you’ve got to be good at it if you want paying on time.
If you’re not getting paid on time there will be reasons:
1) They haven’t got the cash
2) You don’t invoice them on time
3) You don’t make your terms clear
4) You don’t enforce your terms
5) They don’t like you, or your credit controller
6) You’re not important enough to them
7) They’re not happy with your product or service
Sorry, some of these are harsh, but it’s the way it is. Just think about how you decide who gets paid first? Customers know instinctively who they can get away with not paying.
It might take some thought to change your credit control, but the prize is a big one.
A £2m business can easily improve their debtor days by just 5 days – this will put an extra £34k in the bank – permanently! Who couldn’t use £34k in their business right now?
And, you vastly reduce the risk of bad debts.
So, what to do about it?
- Pay attention. Every day. Start a habit of looking at debtors every day, ask for an update from your credit controller every day, they’ll soon get into the habit of having the answers and getting a step ahead.
- Decide on an action plan to tackle overdue accounts and persistent offenders.
- Invoice customers straight away where you can, don’t wait until the end of the month. On the 8th August I’m still waiting for 2 supplier invoices for work they did in early July! They’ve just lost 28 days. Apart from that, invoicing late makes you look sloppy.
- Call BEFORE the invoice is due to check they’ve received it, that it’s been cleared for payment, and ask for the date it’s scheduled for payment. You just removed all the likely excuses they would’ve used.
- Put the right person on the job. Credit control is ALL about relationships – having a dragon on credit control will only make your customers not like you. Credit control needs to be best friends with your customers purchase ledger – people pay people they like quicker.
- Use the phone. It builds relationship, trust and gets results . Email and letters are the slowest and least effective way to collect cash.
- Credit control is a daily job. Picking it up once a week just won’t do. You need to follow up.
- Take the time to write a proper credit control policy so that everyone in your business understands who you allow credit, how much, and a step by step guide on how you collect cash and keep customers within terms.
Remember, the point is getting YOUR cash into YOUR bank. A sale isn’t a sale until it’s been paid for.
And you’ve got to be PERSISTANT and CONSISTENT. If you aren’t then you just lost the competition and you’ll never be at the top of the list to get paid.