As mentioned last week, cashflow is the ‘lifeblood’ of every business and poor credit control will greatly affect your cash flow and your ability to pay your debts on time. By setting up strict credit controls and managing your debtors your chances of payment will improve if things go wrong for a customer.Last week we covered some of the credit controls you can put in place… this week is we will look at managing your debtors:
Manage your debtors…
Maintain accurate and up-to-date records.
Avoid making special arrangements for one off companies. No company is so large or important that you should let them ignore your terms.
Follow up customers trading outside their approved credit terms immediately.
Deal direct with decision-makers at the customers.
Automatically send out reminder letters and follow through on them.
Confirm all verbal arrangements in writing.
Visit them if payments are not made on time. Only leave when you have a commitment from them.
Follow up the customer with regular phone calls and always get a firm commitment as to when a payment will be made. If the payment is not received when promised, follow them up again … consider going to pick up a cheque from them.
Pay attention to customers that are expanding rapidly. Your sales might increase because of this however rapid expansion puts pressure on the customer’s management and may increase risk.
Stop supplies if accounts are not being paid.
Send out professional demand letters.
Threaten legal action – you must intend to follow through with it … if you don’t you will probably wait even longer in the future.
Use a professional debt collector if necessary and be prepared for the possibility of going to court.
Communication is the key to preventing or resolving most problems. Make sure all of your staff are well informed of the credit control procedures and the reasons behind them.
Building Systems Into your business
