free small business advice & information

Article Index
Credit Control
Checking for Credit
Setting Credit Limits
Your Credit Terms
Everyday Credit Control
Delayed Payments
Chasing Debts
Working with Big Companies

Credit Control

4. Everyday Credit Control

4.1 Invoice promptly. The sooner you invoice, the sooner the payment is due.

4.2 Call the customer to confirm each delivery has arrived and that no goods were missing or damaged. Confirm the payment details.

4.3 Set aside a regular time each week to chase outstanding invoices, focusing on:

  • The largest debts, followed by the oldest.Using an aged debtor schedule may help to identify these.
  • Customers you guess may have problems.

4.4 If a customer exceeds your credit limit, insist the excess is paid before accepting any more credit orders.

4.5 If a customer has not bought from you for six months, or orders fall below your minimum, find out why.

  • Is the company going bust? If so, try to get any money you are owed as soon as possible.
  • If customers do not want to buy any more, cancel their credit.

4.6 Every month check the total credit outstanding across your whole business.

  • How many days' sales does this represent? For example, in a business with sales of £1,000 a day (annual sales of £365,000), total credit outstanding of £44,000 represents 44 days' sales.
  • If the days' sales figure rises, you are being paid more slowly. Investigate and correct the problem.

4.7 In a seasonal business you may be unable to chase debts during your busy period.

  • Consider making use of a debt collection agency or a specialist solicitor.

4.8 Consider using a monitoring service, offered by most credit reference agencies, to monitor the ongoing financial status of your customers.

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