Being a business owner comes with many challenges, especially concerning money. No more so when interest rates are rising, and the economy is in a recession.
You have to have enough money to run the business and pay yourself and your employees, so you have to price your products/services correctly. Then, the biggest monetary challenge that most owners have is credit control—also known as getting invoices paid on time! With the economy in recession and credit/finance becoming harder to obtain, there has never been a better time to tighten up credit control in your business.
Many businesses operate not knowing what their month-end payments will be, but this is not sustainable. After all, you can only run out of money once.
This article gives you six credit control tips so you can get paid on time AND build a consistent cash flow.
Tip #1 – Write a credit control policy document and use it
Create a formal company policy document for your credit control procedure and help your staff follow this process. Over time, your credit control procedure will be a robust, repeatable working practice.
Tip #2 – Perform regular credit checks
Performing regular credit checks on your clients will save time wasted chasing late payments later if you offer credit to those who cannot or will not pay. Perform these financial status checks, and you can make better, informed decisions about whether or not to trade on credit terms.
Tip #3 – Automate your invoicing process
Creating, sending, and chasing invoices take time, so automate this process. Streamlining this process helps with your efficiency and increases the likelihood that invoices will be paid on time and within agreed terms.
Tip #4 – Diarise courtesy calls
The longer you take to follow up on late payments, the bigger the gaps in your cash flow AND the higher the chances of clients paying even later or not at all. To rectify this, consider making courtesy calls before your invoice is due. A call effectively reduces the likelihood of late payment as anyone can ignore an email.
Tip #5 – Prioritise chasing overdue debts
Chasing invoices takes time and effort, so prioritise overdue debts first. You need to get these paid as soon as possible as it will only get harder to collect as time goes on.
Tip #6 – Review your process regularly and train the necessary people
Review your credit control at least once every month, so you know exactly who owes you money, how much money you are owed, and who needs to have tighter credit terms. Use this time to improve your procedure and ensure that staff has sufficient training and support to perform their job effectively.
Reduce the gaps in your cash flow
Late payments can result in more debtor days and significant cash flow gaps. This is NOT good for business in the long term, so make sure to implement these six credit control tips. If you outline a credit procedure, automate what you can, perform regular credit checks and make key courtesy calls, you can ensure consistent month-end payments to help you build a healthy and sustainable cash flow.
