Late payment issues

Late payment issues are a common occurrence within most companies and as I’m sure you know late payers seriously effect a company’s cashflow. You will see a reduction with problems like this when you put effective credit control procedures in place.

How would it change your business if you knew when you were going to get paid? How good would it be to receive payment on time?

What is a cashflow problem?

A cash flow problem is when a business does not have enough cash to pay it’s liabilities. To maintain a “positive cashflow” position, always ensure that you have more money coming in, than what is going out.

2 of the most common causes of cash flow problems are:

1. Slow-paying customers.
2. No plan in place for collecting payments.

So how does a credit controller improve cash flow?

1. A credit controller pro-actively calls customers to confirm payment dates so that you know when you are going to get paid. They resolve queries with the aim of doing so before your invoice is due for payment. They will implement an effective credit control cycle / procedure, suitable for your business to ensure your customers pay on time.
2. Sometimes all you need is to give customers a “little push” to remind them to pay when they are overdue. However, where accounts are 60 or 90+ days overdue, a set-in stone procedure of “how you deal with this” must be in place to recover your aged debts. It is the credit controllers’ job to act using the procedure in place.

What else does a credit controller do?

Reduce business risk

Your credit controller will be able to establish what credit limit and terms to allow your customer. Not every customer will have a great credit score but knowing the score and the risk before doing business is what is important.

Regularly monitoring and updating customers details ensures they don’t go over their credit limit and ensures that invoices are made out to and sent to the correct place.

Negotiating

A credit controller is made great when they have tact, good instincts and great negotiating skills. They will know which excuses are genuine and which are “stalling tactics”.  Experience will guide them with how to counter those excuses effectively to negotiate payment or a formal payment plan.

What else can you do to reduce cash flow issues?

• Re-negotiate supplier contracts; Seek quotes from similar companies and negotiate down for a comparable service/product
• Improve your invoicing; Invoice right away, get invoices paid faster, resolve queries and disputes quickly, use a cloud accounting software to complete your invoicing
• Make it easy for customers to pay you; offer various ways to pay (card, bank, online etc)
• Reduce expenses; but ensure you don’t cut back on expenses that reduce your ability to generate revenue.

Keeping cash coming into your business requires persistence, dedication and experience. It is important that the person who is responsible for credit control in your business has the skills required to complete the job effectively for you.

You may not require a full-time credit controller, in fact, you may only need 3 or 4 hours work per month. The point being, that having someone dedicated to credit control will cost-effectively improve your business cash-flow and reduce business risk.

For as little as £35 per hour, you are one step closer to improving your business cash-flow when you use a credit controller.