Effective credit control is crucial to the success of any business. The first objective is to avoid late payments or non-payment of monies your business owes or is owed to you.
Our guide provides valuable information for businesses of all sizes. Effective credit control management is crucial for reducing credit risk, minimising debtor days, and improving cash flow.
Credit control involves assessing customers' or suppliers' creditworthiness to determine their ability to pay on time. It also includes implementing measures or strategies, such as payment plans or risk calculations, to effectively manage and maintain the waiting period between the delivery of goods or services to the customer and the business's receipt of payment.
When businesses use credit control, they protect their business from risky borrowers as they issue credit.
A business's success directly depends on the demand for its products or services. Sales are a vital measure of a company's performance, influenced by a range of factors. Implementing effective credit control measures can be a powerful strategy to drive sales growth.
Credit control allows customers to buy goods or services on credit, deferring payment and making purchases more attractive.
Breaking the purchase price into smaller instalments may help customers justify the investment, but interest charges will increase the total cost potentially.
Implementing a credit control policy can significantly boost a business's sales. However, it is essential to thoroughly evaluate who is granted credit. Extending credit to individuals with a poor credit history can lead to non-payment for products or services, undermining the business's financial health.
A company credit report is a valuable tool for evaluating a potential customer's creditworthiness. By analysing their payment history, you can determine appropriate payment terms and conditions for a contract.
You can confidently enter a contract if there are no concerning factors, such as a low business credit score or County Court Judgments (CCJs). However, if there are issues like a low credit score, consider asking for partial or upfront payment before beginning work. It is important to note that these issues do not necessarily mean you should write a customer off altogether.
1. Establish Clear Credit Policies:
Set clear guidelines for offering credit to customers. Determine credit limits based on the customer's creditworthiness, payment history, and financial stability and then monitor that over time.
2. Credit Checks and Evaluation:
Conduct thorough credit checks on new customers before extending credit. Use credit reference agencies like CoCredo and assess their creditworthiness to minimise the risk of late payments or defaults.
3. Defined Payment Terms:
Clearly communicate payment terms to customers before starting any business relationship. Common terms include Net 30 (payment due within 30 days), Net 60, or Net 90.
4. Invoice Management:
Issue accurate and timely invoices immediately after delivering goods or providing services. Clearly state the payment due date and any penalties for late payment.
5. Encourage Early Payments:
Offer incentives like early payment discounts to encourage customers to pay their invoices sooner.
6. Communication with Customers:
Establish open communication channels to address any payment issues or concerns promptly. Be understanding but firm about the importance of timely payments.
7. Negotiate Payment Plans:
If a customer is facing financial difficulties, be willing to negotiate a payment plan that allows them to clear their debt over a specified period.
8. Set up a Bad Debt Reserve:
Account for potential bad debts by creating a reserve fund to absorb any losses from unpaid invoices.
Effective credit control is a proactive process that requires ongoing monitoring and adjustment. By implementing these strategies, companies can reduce credit risks and ensure a healthy cash flow to support their growth and stability.
Often, this requires organising, planning, and consistently following established processes. While discussing payment capabilities with customers can be sensitive, credit control is essential to demonstrate your company's credibility and commitment to due diligence.
Having good credit is crucial for maintaining financial stability and growing a business.
Like individuals with personal credit scores, businesses also have credit profiles demonstrating their creditworthiness and overall financial health.
This is where business credit checks come into play. Company credit checking is the process of evaluating and assessing the creditworthiness of a business entity. It provides invaluable insights into a company's financial history, payment habits, and risk potential, allowing creditors, suppliers, and partners to make informed decisions.
For over 20 years, CoCredo, winner of the CICM British Credit Awards 'Technolgy Development Award 2025', has been one of the leading providers of UK and Ireland online business credit reports, financial data, and relevant information on companies to businesses and their suppliers in the UK, Ireland and around the world, effectively safeguarding them from bad debt
Our UK and International business credit monitoring service provides regular email notifications of any business changes (such as financial performance, payment history, county court judgements, etc.) for 12 months, allowing you to continuously track any changes providing valuable insights into a company's financial performance, so you can react proactively if necessary to protect your own business.
Why not take advantage of a free company credit report? Contact us at 01494 790600 or email us for more information on our business credit check services that will reduce your credit risk and boost your cash flow and productivity.
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