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Do You Have Credit Control Or Cash Flow Problems?

Do you have cash flow problems in your business? Is your bank balance lower than it could be or are you at your overdraft limit? Do you agree your payment terms with your customers up front? Do you issue your invoices as soon as the product or service has been delivered? Are you chasing your outstanding invoices or are you just waiting for your customers to pay? Credit control is key to business success but are you giving it the priority it deserves in your business?

Here are some tips on credit control to help you improve your business cash flow:

Make credit control a priority. Many businesses do not prioritise credit control and only realise its importance when it because a crisis. It is so easy to be focused on delivering products and services as this is usually the area of expertise of the business owner, however unless the money for these products and services is collected on a timely basis you will soon find yourself with cash flow problems. This can end up being very costly in terms of overdraft charges and write offs, as well as even leading to business failure.

Have a process and follow it. What is your credit control process? Many business owners cannot answer this question, can you? Having a set process which your business follows including contracting payment terms, timely and accurate invoicing, chasing invoices, escalation procedures and what you do if a customer does not pay will enable you to improve your cash flow.

Which customers do you offer credit to and what are your payment terms? You need to decide which customers you will offer credit to and if you are going to offer credit when do you want to be paid. You may want to review your current terms to see if they are appropriate for your business (e.g. you may offer 30 days credit but could bring this down to 14 days) and consider deposits and staged payments. You may want to credit check the financial position of clients you are planning on working with, especially where they will represent a large percentage of your turnover.

Be clear about your payment terms. Do you discuss your payment terms when contracting with a customer and do you have your terms in your contracts and agreements and on your invoices? If you are not up front and clear about your payment terms with your customers it will be much more difficult to collect payment within your terms.

Consider offering different payment methods. The more options your customers have for payment, the more chance they will pay you. These may include direct payment into your bank account, direct debit, credit card, Paypal, cheque or cash.

Be timely and accurate. A lot of unpaid monies arise from delays in issuing invoices and errors in invoices. Consider when you are going to issue invoices (e.g. rather than issuing them all at the end of the month why not issue them as soon as the product or service is delivered) and always check that your invoices have been received. Also think about how you are going to ensure their accuracy

Customer service problems. Another reason for unpaid invoices is poor customer service. Where you have fallen short of your normal service standards discuss this with the customer and get to a resolution. If you ignore it you will end up with a disputed invoice at a later date.

Don't be too nice! You may not like asking for payment, but remember you have provided a product or service and the customer has agreed to pay you for this. The customer has an obligation to pay you within the agreed payment terms. Ensuring you get paid may require you to not only ask for money but also to be firm with your clients. You may have to consider stopping working with a client if they are slow paying or do not pay at all. If you are too nice about it your business will be the loser.

Get help. Where you don't have the time or the expertise to manage your credit control in house, you may want to seek outside help. There are lots of people who can help you with this including credit controllers and accountants. You may also want to use a credit collection agency for old outstanding invoices and may want to consider specialist financing help such as invoice finance.

As you can see from the above there are many reasons that could be stopping you moving forward towards your goals. Don't just motor on regardless as you will find you will not achieve what you want to. If you can understand what is stopping you and address this first, you will have much more chance of getting your business to where you want it to be.

Author: Liz Makin
Published: February 2011

Makin It Happen has a range of personal development online courses to purchase, created by Liz Makin, including communication, resilience, time management, stress management and coaching. Liz Makin also provides personalised business coaching, business mentoring and stress management services to business owners, directors, managers and professionals.


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