Is the Credit Crunch Affecting your Business? Most of the small and big businesses lack in the area of proper cash flow management and thus suffer from uninvited credit control problems. We, at Credit Control solutions provide our clients with information about cash flow control as well as various outsourced service to overcome the problem.
More so now than ever, it is important that you have a firm grip on your credit control (cash flow). Most smaller business and to a lesser extent medium sized businesses in the UK do not know how to undertake their credit control properly and thus face credit management problems.
Many businesses view credit control as an inconvenience and therefore do not take it seriously. They fumble their way through preferring to be on the telephone selling, or visiting customers, in fact anything except picking up the phone and asking their customers for payment!
If you don’t chase your customers for payment, guess what? Many of them will not pay you, especially in the current financial climate, Most businesses are keeping hold of their cash until they are quite literally forced to pay you.
If you adopt the following chase policy you will be successful. If you don’t want to, let us do it for you
· Issue invoices ASAP after supply of goods or services
· Immediately reduce your payment terms to 7 days
· Phone up your customer before the invoice is due for payment to overcome all usual objections i.e. copy invoice, query etc
· Deal with any queries as a priority
· Chase your customers for payment on a regular and diligent basis
· Send out regular chaser letters (implement a proper standard letter process)
· Always use the phone as your primary source of contact with your customers
· If they exceed your payment terms by more than 10 days, put them on stop
· Always refer accounts over 60 days to a collections agency
To monitor how effective implementation of the above suggested chase process will be, why not start to monitor your Days Sales Outstanding (the amount of time it takes customers to pay their invoices). If you monitor this over a period of time, you will see the average number of days it takes customers to pay you reducing!
Another very simple way of monitoring your credit control performance is to simply take a snapshot of your aged debtors at the end of each month and monitor the percentage of debt over 60 days old. As a rule of thumb, if percentage of debt over 60 days old is higher than 10% you have serious issues. My guess is that lots of your invoices have unresolved queries on them, or you simply do not chase your customers for payment effectively
If you would like us to e-mail templates for DSO calculation & Aged debt percentage comparison calculations, then please contact us using our on-line query form and we will be only too happy to do so.
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