Credit control process: hints and tips

Published on January 14, 2016

Businesses don’t fail because of a lack of profits, they fail because of a lack of cash. So it’s vital that you maintain links with the customer after the goods or services have been delivered, so that you get paid on time. It’s one of the “boring but essential” things to do and so it’s often overlooked or not well managed. January, when people have been closed for a few days or even a few weeks, is the worst time for cashflow.

Here are our tips to keep the cash coming in:

Always be polite but assertive, firm and straight. Asks for specifics and clarify answers. Keep notes of conversations, including the name and job-title of the person you spoke to. If you can’t get a straight answer ask to speak to someone higher up.

Send invoices as soon as the sale is made. Some businesses schedule supplier payments based not on the date of the invoice but the date they receive or process it. Sending invoices at the end of the month can push them into the following period’s payment run, meaning you get paid at least a month later. In extremis, this could consume cash equivalent to 120% of one month’s turnover, once VAT is taken into account.

Whatever the customer says, do not send the invoice to anyone other than the accounts department. Send it anywhere else and you have no control over how long the invoice sits in a pile on their desk. This risks even longer delays than not sending the invoice promptly in the first place. By all means run off a duplicate, clearly mark it COPY and send that to them, but address and send the original to the accounts department.

Make sure the invoice includes:

  • A PO number if the customer’s system requires it (ask them don’t assume that just because they haven’t given you one doesn’t mean that they don’t need it);
  • The name of the person who will approve the invoice for payment – this makes it harder for the payments section to claim ‘it’s not yet approved for payment’
  • A clear description of the products and services provided;
  • A clear statement of the payment terms and due date. If this is contractual, speak to accounts payable or it will just go into the system and get paid when it suits them, which almost certainly is not what you were expecting;
  •  A statement that you reserve the right to charge interest under the Late Payment of Commercial Debts (Interest) Act 1998. No one charges this but it makes the point that you’re serious about cash collection.;
  • Your bank account details including IBAN number and SWIFT code if the invoice is going abroad;
  • The VAT number, company number.

Phone up the customer’s accounts department within three day of sending. This gives you the chance to make sure they have received the invoice, all is in order i.e. they have ALL the details that they need. Go through it line by line on the first time that you invoice a customer, point out any contractual payment dates, check who will approve it for payment and that it will be on the appropriate payment run.

If the payment is late call and remember to be polite, clear but firm. Inform them of any charges that your company will enforce (like a Statutory Late Payment Interest at 8%, for example).

In conversations, ask for confirmation and specifics, try and get promises not evasions. Some assertiveness now will make it harder for them to wriggle later. Keep dated record of conversations and processes they make. Follow up by email, It’s easier to apply pressure if you can get them to make promises you can quote back to them.

Look out for holiday periods. Work seems to stop at the end of the second week of December for example, not starting until, at best, the first full work week of January. So accelerate chasing processes in December and persuade them to get you money on the pre-Christmas payment run.