The Forum of Private Business has conducted research that finds businesses with well-established credit control processes are far less likely to encounter serious late-payment issues than those with only informal arrangements.
Late payments can jeopardise a business’ future, but for many SMEs, having a rigorous process in place, let alone a resource to run it, feels too demanding.
Wendy stresses the importance of understanding at what point a credit control process should begin.
“Credit control should be preventative in the first instance, which means it begins before any sale is made”
In this context, the credit control process is very much about people, and the key roles of different teams.
Knowing Your Customer
Just as it is vital for a business to understand its customers to win orders and thrive, so it is just as crucial that it knows as much about these customers as possible before extending credit to them.
“The credit control process is not simply something that kicks in when problems occur,” Wendy points out, “but rather it must come into the equation early on the business relationship.”
This means vetting customers before extending credit to them and doing the necessary, diligent research to find out all you can about them.
“Don’t make your credit control subservient to your sales,” Wendy advises, “because you want to be as sure as you can about your customer before you act.”
Wendy also points out that a credit control team should have the authority to suspend a service or delivery of goods if money is outstanding.
“Without credit control, your sales team can be putting your business at risk, however unaware of this they are”
Making Relationships Work
Just as a sales team builds relationships with prospects and customers to meet its objectives, so relationships are a key part of the credit control process.
“Keeping clear channels of communication open is as important as ensuring you can collect your debts,” explains Wendy.
“Maintaining positive relationships with customers is a way of making the whole credit control process that much smoother”
“Regular courtesy calls to confirm receipt of documents and invoices is a good way of keeping in touch,” advises Wendy. “It is both a way of displaying friendly professionalism and gives the customer the opportunity to give an account of themselves.”
“Credit control is as much about people as it is about money,” Wendy concludes, “and having the right people in place to ensure you have a proper process you can rely on.”