No small-business owner wants to spend half their time chasing late payments and trying to keep their cash flow from stagnating, but when you’re supplying larger firms, this can be the reality of many managers’ day-to-day working lives.
However, even with big businesses – who typically take longer to settle their accounts – there are steps you can take to ensure your cash flow remains liquid.
Firstly, admit to yourself that chasing late payments does not make you the villain; money owed to you is rightfully yours, and you have a legal right to pursue the debtor for payment on the agreed terms.
With that in mind, here’s our five-step guide to making the credit control process run more smoothly:
1. Credit Checks – Even before you allow an individual or business to run up a bill, carry out credit checks to determine their creditworthiness, and set a credit limit for them to limit your own liability.
2. Credit Control – It’s no good expecting prompt payment if your internal processes are not up to scratch. Have clear internal credit control systems in place, and make sure invoicing and payments chasing are kept up to date.
3. Payment Schemes – These can range from incentives for prompt payment, to clear instalment-based ways to repay overdue debts, either with or without incurring interest.
4. Payment Schedules – Linked with the above, shorter payment schedules improve your cash flow. Incentivise customers who pay on time – or even sooner – and consider stating permitted fees like statutory interest and overdue charges in your payment terms.
5. Make it Easy – Ensure your payment details are clearly displayed on all payments-related correspondence, including the full details of the relevant invoice. If the information is all there, your customer is more likely to make the payment there and then.
We know there is plenty of other admin to be concerned with when running a small business, but your profitability is crucial for long-term survival – which is why we are always delighted to handle the credit control for companies whose cash flow has been the only obstacle to growth, investment and expansion.