Despite the smaller sums of money that may be involved, the credit control benefits for micro-businesses can outweigh those of larger firms in terms of their overall impact on your profitability.
If you have very few employees – perhaps just yourself, or you and your spouse – then you are a micro-business.
The smaller your business is, the tighter your cash flow is likely to be at any given time, with less capability to withstand shocks such as non-payment on a large client account.
You may only have a few ongoing clients, making it even more important that each should pay you on time.
Here are three of the main credit control benefits for micro-businesses:
- Save yourself some time
Every second you spend chasing an overdue invoice is time you could be spending on building your business to a larger and more stable position.
Often people think “I don’t need a credit control policy until we’re a bit bigger”, but in many ways it’s more important to protect your income when you’re smaller and less able to cope with late or non-payment.
Besides that, you might simply be inexperienced when it comes to the admin side of invoicing and chasing debts, so adopting a clear credit control policy can help you to be much more systematic and professional.
- Avoid incurring costs
The worst-case scenario is when late payment from a client leaves you unable to pay your own bills. Often when the money arrives into your account, it’s already earmarked for other things.
In extreme cases, you might incur penalty fees or overdraft charges due to your cash flow being unable to cope with the shock – and although the non-paying client is clearly to blame, it’s important to prepare for this eventuality anyway.
Effective credit control keeps as much of your money as possible coming into your account on time, or even early – raising your bank balance, so there’s always a little left in the pot when your own bills come in.
- Peace of mind
Business should be business, but one of the biggest credit control benefits for micro-businesses is the peace of mind that comes from having your payments arriving into your account on schedule.
When it’s just you, or just you and a partner or friend, it’s hard not to take non-payment quite personally, so it’s useful to do what you can to avoid the negative emotion that comes with that.
Systematic credit control procedures don’t just bring in client payments faster; they also take some of the personal stress out of the process, as when you need to, you can just refer to your policy rather than fretting over how to handle a situation.