Statistics show that small business owners spend around 10 hours per week doing just that. Imagine if you could have an extra 10 hours in your week to work on expanding or improving your business?
That’s where credit control comes into play. In this article, we’ll break down what exactly credit control is, why it’s so important, and some important tips on how to manage it properly.
Credit control is a system within your business that minimizes the risk of unpaid invoices, only giving credit to customers who are able and likely to pay.
Credit control has a number of goals: reducing bad debt, increasing your business’ cash flow, and improving your credit terms with suppliers. All in all, credit control ensures that your business is not piling up unpaid invoices that need to be chased down.
Credit control is not as simple as sending invoices on time. In fact, there are many aspects that must come together to properly manage your company’s credit control.
Credit control is important for a number of reasons as it affects every part of your business!
If you allow your credit to get out of control, with customers consistently making late payments or not making payments at all, the consequences can be severe for your business. Here are some other reasons why credit control is crucial to your business:
Late and badly managed payments can quickly cause cash flow problems.
When cash flow gets obstructed, businesses are sometimes forced to do drastic things to keep things moving smoothly. For some businesses, this even means that taking a salary cut may become necessary.
By managing your credit control properly, you avoid this extreme situation.
The most common problem caused by credit control issues is inefficiency and wasted hours.
The amount of time it takes to deal with unpaid invoices, send out reminders, and go through the whole debt collection process is enormous, and it doesn’t have to be!
If your credit control processes are optimized, your business will minimize the amount of time spent on debt collection.
In the end, if your debt collection processes are not handled properly, it can leave your customers with a bad image of the business.
This is not a great way to maintain strong business relationships. And, in the worst case scenario, some debt may simply need to be written off or pursued in court.
Both of these scenarios leave your business less profitable in the end.
As we’ve mentioned, credit control implicates many elements and processes of your business. That’s why there are a number of ways to manage it properly, from the beginning of a customer relationship right until the end.
Let’s check out some of the top tips that you can implement today:
Right from the moment you send an invoice, you can include credit control best practices in your process. Invoices should be sent out without delay, and should always be double checked for complete accuracy.
Fixing even the smallest issue on an invoice after it’s been sent out can cause a huge delay in receiving your payment.
Using electronic invoicing is one of the best ways to send out invoices as quickly and as accurately as possible.
Keep track of customers who have been known to make late payments or have a history of problems with their invoices.
These customers should be followed up with a few days after being sent their invoice, in order to provide a prompt reminder. Customers will then have less of a chance of further pushing back or forgetting their payment.
These two easy tips are the best way to kick off your credit control management, but it’s crucial to keep an eye on credit control along every step of the way.
Credit is a complex topic, but no matter what size of business you’re in, it’s going to be a part of it! Knowing how to properly use, manage, and understand credit is a key ingredient in growing a successful business.
10 hours per week taking a salary cut
Posted on November 2, 2020
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