3 credit control mistakes to avoid making from the start
To understand what credit control mistakes are, you, first, have to consider what credit control means.
According to Investopedia ‘Credit control, also called credit policy, includes the strategies employed by businesses to accelerate the sales of products or services through the extension of credit to potential customers or clients.’
It’s a no-brainer than when money doesn’t come in on time, this affects your cash flow. While this is often a challenge even for the biggest of companies, a good credit control strategy can mitigate the threat of late payments.
Despite knowing this, many companies keep making the same mistakes. To help you avoid following the same cash-strapped trajectory, here are three common credit control mistakes you need to avoid.
1.The lack of a proper strategy - unclear payment terms and rolling over
One of the most basic mistakes companies make is the complete lack of preparation when it comes to credit control. When it comes to your accounting, it becomes a reality that if you fail to prepare, you are, in essence, preparing to fail.
Setting a day-to-day strategy could be the wisest decision for your business. Once a strategy is in place, your teams should be trained to ensure all tasks are completed to ensure smooth cash flow.
Ironing out the details of how long your customers have to make payments and setting penalties for late payments, for instance, may help you ensure stronger credit control. In this process, however, make sure you’re factoring in client experience and don’t take draconian measures that scare your market away.
When it comes to rollovers, review outstanding invoices regularly. Highlight ones that have been overdue the longest and the ones that are worth the most and make a plan to get them sorted accordingly.
2. Not making the most of your resources
When it comes to late payments, there is a lot that you can do to recover what is owed to you. One critically overlooked element, in this process, is how your invoices look and how easy they are to understand.
Clearly-designed invoices can make the process of payments more streamlined, making this type of activity more efficient for you and your clients. On the contrary, using unclear invoices may bring about certain disputes when it comes to payments.
Moreover, the terms and conditions of your business is another asset you can leverage in your credit control strategy. This helps you regulate these types of issues with greater confidence and transparency.
Another credit control resource you can leverage is outsourced or cloud-based accounting systems. With these systems, you’re able to generate monthly statements for customers, debtor reports, and leverage direct email and telephone communication via your system to remind clients of overdue balances.
If you choose an outsourced accounting department, they even provide you with admin support on bad debts and any legal cases that may arise.
3. A lack of communication
When it comes to your business and late payers, you are the final authority on this.
Simply identifying these types of customers or clients isn’t sufficient to safeguard your business. This information should be shared among your sales teams, so they’re able to halt ongoing service delivery until certain payments are made.
If proper and effective channels of communication are in place, your teams are empowered to make more intelligent sales decisions and find avenues for the company to make money - even on the back of tardy payments.
Avoid common credit control mistakes for a powerful financial strategy
With effective credit control processes and systems, you can rest assured that a well-maintained credit management system is in place.
Efficient credit control will help you get paid faster and grow your business in ways that matter. Make sure your policies and processes recognise the mistakes we’ve highlighted and avoid them.
At Ookkee, our outsourced accounting services support effective credit control procedures. We’re in the business of equipping companies with cloud-based accounting services and systems, helping you keep track of your accounts from anywhere.
Staying competitive and enjoying a distinct edge is much easier when your finances are in order.