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Credit control: A Guide for Start-ups
How do I keep on top of credit control on a day-to-day basis?
By following some simple rules of thumb, credit control becomes much easier. You should:
- Invoice as soon as you can. Payment then becomes due earlier.
- Set aside a time to chase debts. Don’t put off the awkward conversations – timetable an hour or so each week to telephone late payers, starting with the largest unpaid invoices first, moving on to the oldest debts.
- Confirm that everything is OK once you have sold a product. Call up customers and get them to confirm that they are happy with their purchase and any goods arrived undamaged and as described. By doing this, you ensure that customers cannot invent excuses after the fact as to why they haven’t paid.
- Insist that excess credit is paid before accepting new orders. If a particular customer has gone over their credit limit, refuse to do business with them until they have paid it off, however tempting new orders may seem.
- Use a credit monitoring service. Most online credit check companies also offer an ongoing monitoring service, in which you can check on any changes to the creditworthiness of customers. This will allow you to spot problems on the horizon before they occur.
- Chase up inactive customers. If orders fall below minimum levels or a customer hasn’t ordered from you in a number of months, it could indicate they are in financial trouble. Investigate whether this is the case, and if it is, try and recover any outstanding debts as soon as possible.
- Calculate your total outstanding credit periodically. Every month, you should look at how much money you are owed across your business – and what it is costing you in real terms. This will help focus your mind on the areas of most concern and allow you to monitor whether credit issues are improving or getting worse.
- Consider using debt collection agencies. If you don’t have enough time to chase up all your unpaid debts, consider using a debt collection agency to do the legwork for you.