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6 Top Tips for Credit Control


Here are our 6 top tips for credit control from setting credit limits, invoicing on time, through to chasing debts. Following these simple steps will help you streamline your credit control procedures.

1. Credit Check all new customers before setting their limit

Before taking on any new customers always be sure to credit check them to ensure they are worth getting a credit limit on. You have to be vigilant with your selection criteria and you can refuse to work with clients if you don’t feel their credit score is high enough, or if they have any CCJ’s against their name. Remember a late paying customer could damage your cash flow!

2. Make sure your paperwork is complete

When setting up a new customer, always ensure the terms and conditions are signed and complete before any goods or services are produced or started for your customer. Ensure in the terms and conditions that it clearly states what the agreed payment terms are e.g 30days EOM. Again make sure your terms detail that you have the right to proceed to debt collection, if the customer doesn’t stick to the agreed payment terms. Also, make sure your customers know that you have the right to put their account on hold until they have caught up with their overdue payments. These are all things that can back your case if a customer turns nasty and refuses to pay!

3. Invoice on time, send monthly statements and follow them up

Your invoicing process is an important part of your cash flow structure, if it’s not correct, it could interfere with your business getting paid. By getting your invoices out on time, you will be able to create a pattern that your customers recognise e.g we send our invoices out at the beginning of every week. Also, ensure your invoices clearly show what the agreed payment terms are so the customer is constantly reminded, this will get them into a routine of paying you at the same time every month. For first time invoicing a new customer, call or email them a few days later to ensure they have received them and to check that everything is correct. At this point they will highlight things that are missing e.g. purchase order numbers, waiting for these can cause a huge delay in receiving payment. Sending statements out every month is a gentle prompt to all customers who have invoices that are due for payment. Also, calling customers a few days prior to their invoices becoming due will remind them to add you on to their payment batch.

4. Be strict with overdue payments

As soon as a customer’s invoice has been missed for payment, you have to be strict, call or email them straight away, so they know you haven’t forgot about it. You have to stick to a process for all customers e.g if a customer keeps trying to delay payment you need to find out why and understand how you can help, in this situation we will put their account on hold to prevent raising more invoices which subsequently they can’t afford! You can also try and agree a payment plan to clear the debt to prevent it going legal. Also, you need to be aware of your credit insurance, how long do they have to pay before you lose your insurance on them?

5. Credit limit reached

Once a customer’s account has reached their credit limit, you need to inform them right away. A credit limit is there for a reason and cannot be exceeded, at this point you should place the customer on hold. It’s ideal to have a process where once a week or month, depending on how often you invoice, you see who is close to their limit and inform them. This will give them enough time to process any payments to prevent problems arising when you come to invoicing them.

6. Chasing debts

You need to have a process when it comes to chasing customers who are persistently not paying their debt. Before you take the legal route you need to give your customers firm reminders that this is the route you’re about to take, this can give them the chance to settle payments beforehand. After your reminders, if they still do not pay, you can contact a debt collection agency or a solicitor and have debt collection letters sent. Usually, you can send an LBA (letter before action) this type of debt collection doesn’t add on any costs to the customer and can be useful to send first, as they can be sent via email as well as by post. If this isn’t successful you can then progress this to a LPD (late payment demand) this will add on costs, typically in the form of interest and compensation. Finally, if you’re still not receiving any payments you can then use your solicitor to issue a CCJ against the company – this can add on a lot of costs for both you and your customer, so ideally only do this if you’re sure you will win!

 Good Luck!

Tagged With: Blog, Credit Control, Top-Tips, Credit Check, Credit Limit

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