Being a business owner comes with many challenges, especially when it concerns money. None more so when interest rates are rising and the economy is in a recession.
You have to have enough money to run the business and pay yourself and your employees which means you have to price your products/services correctly. Then, the biggest monetary challenge that most owners have is credit control. Also known as, getting invoices paid on time! With the economy being in a recession and credit/finance becoming harder to obtain, there has never been a better time to tighten up credit control in your business.
Many businesses operate not knowing what their month-end payments will be, but this is not sustainable. After all, you can only run out of money once.
Let us give you 6 credit control tips so you can get paid on time AND build a consistent cash flow.
Tip #1 – Write a credit control policy document and use it
Create a formal company policy document for your credit control procedure and help your staff follow this process. Over time, your credit control procedure will be a robust, repeatable working practice.
Tip #2 – Perform regular credit checks
The time spent performing regular credit checks on your clients will save you so much time wasted on chasing late payments later if you offer credit to those who cannot or will not pay. Perform these financial status checks and you can make better, informed decisions about whether or not to trade on credit terms.
Tip #3 – Automate your invoicing process
Creating invoices, sending invoices and chasing invoices all take time, so automate this process. Streamlining this process not only helps with your efficiency, but also increases the likelihood that invoices will be paid on time and within agreed terms too.
Tip #4 – Diarise courtesy calls
The longer you take to follow up on late payments, the bigger the gaps in your cash flow AND the higher the chances of clients paying even later or not at all. To rectify this, consider making courtesy calls before your invoice is due. A call is extremely effective in reducing the likelihood of late payment as anyone can ignore an email.
Tip #5 – Prioritise chasing overdue debts
Chasing invoices takes a lot of time and effort, so prioritise overdue debts first. You need to get these paid as soon as possible as it will only get harder to collect as time goes on.
Tip #6 – Review your process regularly and train the necessary people
Review your credit control at least once every month so you know exactly who owes you money, how much money you are owed, and who needs to have tighter credit terms. Use this time to also improve your procedure and to make sure that the necessary staff has had sufficient training and support to perform their job effectively.
Reduce the gaps in your cash flow
Late payments can result in more debtor days and significant cash flow gaps. This is NOT good for business in the long term, so make sure to implement these 6 credit control tips. If you outline a credit procedure, automate what you can, perform regular credit checks and make some key courtesy calls, you can ensure consistent month-end payments which will help you build a healthy and sustainable cash flow.