We’ve all experienced how stressful it can be when customers don’t pay on time. I’ve seen situations where late payments even threatened the viability of otherwise thriving businesses. This is why it billing your customers on time and having an effective credit control process in place is important.
So, what is a good credit control process?
A good process integrates sales and accounts. This is to ensure that when you raise an invoice it is automatically recorded in your accounts. Incoming payments from your customers must be matched to the relevant invoice and overdue payments must be followed up promptly. It’s also important to make it easy for your customers to pay. The information you provide on your invoices and monthly customer statements must be accurate and easy for your customers to understand. This helps encourage them to pay promptly.
How good is your credit control?
If you have an invoicing backlog, if you’re not sure what you’re owed, or if you don’t have up to date debtor information at your fingertips, these are signs that you need to get to grips with your credit control process.
Credit control problems often develop when there are pressures elsewhere in the business — these could be due to time constraints, staffing difficulties or failing to manage debtors in a professional and consistent manner. Whatever the reason, it’s important to identify the problem and take steps to find a solution.
As mentioned, one of the most important steps to get right is ensuring that your sales and accounts systems are aligned. Remember, when you make a sale, you won’t get paid until your customer receives an invoice for the goods or services you provided. Raising the invoice promptly and ensuring that it can be accessed by your accounts system enables your accounts team to keep track of what you are owed. This is a basic step in managing and controlling your company’s cashflow.
Once invoices have been raised and sent out to your customers, it is good practice to issue regular reminders until they settle their bills. This is usually done via a monthly customer statement.
It’s important that the information on your invoices is correct and includes any relevant details that the customer may require (such as purchase order numbers). Monthly customer statements must also be accurate and up to date, making it as easy as possible for your customer to understand what they owe. If you’re not sure what information to include on your sales invoices and customer statements, see our previous blogs— Get a handle on sales invoices and Get a handle on customer statements.
What if my sales and accounts systems are not linked?
If your sales system doesn’t automatically update your accounts system, there is a risk that the invoices and monthly customer statements issued to customers won’t accurately reflect what you are owed.
Incomplete or inaccurate customer statements lead to misunderstandings, make resolving customer queries time-consuming and can result in late payments. They also make debt collection more difficult.
If your systems are not linked, you may be able to overcome this problem via a cloud solution or by exporting relevant data from your sales system and importing it to your accounts. GroForth’s credit control team can help you identify a suitable solution. Contact us for details.