We’ve all heard of the phrase:
Revenue is vanity, profit is sanity, but cash flow is survival.
But what does that mean in practical terms for your business?
If you're serious about understanding and managing your cash flow, credit control cannot go unprioritised.
Here are Cura Accounting’s helpful must-haves for effective credit control:
> Set clear terms that protect you BEFORE you sell
Understand what the best credit terms are for your business.
Balance sales growth and competitiveness against cash flow protection.
Once payment terms are agreed, introduce yourself to your customers’ purchase ledger clerks to communicate payment terms before payments are due.
Payment terms should be written clearly on invoices.
> Credit check before you commit
A quick background check saves months of chasing.
Use credit checks to set meaningful credit limits to minimise exposure.
Decide if putting customers on stop is right for your business; powerful but can rile feathers!
Growth without due diligence is gambling.
> Invoice promptly and accurately
Delayed or inaccurate invoicing equals delayed payment.
Ensure invoices are authorised before they become due for payment, resolving any queries as soon as possible.
Tight credit control processes protect cash flow.
> Customer-centric structured reminders
Firstly understand how your customer’s purchase team operates best (eg phone or email). Then use consistently timed reminders to remove emotion from collections and maintain relationships.
Thank your customers for paying on time.
Customers know what to expect and take your terms seriously.
> Consider offering early settlement discounts
Early settlement discounts can be a helpful way to incentivise customers to settle balances quickly and speed up cash collection.
> Encourage direct debits
Where practical, encourage customers to set up payment via direct debit.
Provides you with the ability to call monies in when they are due, without the customer needing to remember to send payment.
> Track your Debtor Days like you track revenue
If you don’t know how long debtors are taking to pay, your ability to forecast and make solid strategic decisions is impeded.
Strong credit control isn’t about being aggressive. It’s about being disciplined.
What’s your current average debtor day figure?
If you don’t know it instantly, it’s time to make a change. At Cura Accounting we can take the stress out of credit control. Reach out to our team at info@cura-accounting.co.uk if your business would benefit from our outsourced credit control services.
