Good credit control can help your company prosper
Posted on by Cindy Yip
Estimated read time: 4 mins
Credit control is important in every company, especially for small to medium enterprises (SME). Every company should ensure they collect their invoices on time and there are procedures in place to do this efficiently and effectively. Late payments and uncollected invoices are a big problem for SMEs in the UK and accumulation of these will ultimately affect your cash flow and the general performance of your company as a whole.
In the B2B industry, trade credit is what most companies rely on as a form of purchase. You trust your customers to keep up payments and pay you but not everything always works out as is planned which is why you need an effective credit control procedure or team in place to handle invoices. They can be fully dedicated to chasing up invoices therefore you can focus on other parts of the company which need your attention more. Make sure you choose the right person or team who have the right experience and same mind set as you when it comes to managing your company.
A trained and professional credit controller will be experienced in making decisions beneficial for your company’s finances. Although Experian’s company credit reports are laid out to be easily navigated and understood, not all company credit reports are laid out like this. Some may seem complicated and not so easy to decipher for someone who isn’t in the finance profession, this is when a credit controller will be useful. They will also know how to make best use of this report and see what is affecting your credit or customers and suppliers credit.
Before entering into business with a new customer or supplier, your credit controller can find out how credit worthy they are by checking their credit report. This will show their past and present payment behaviour and allow them to spot and decipher any red flags that might be showing which a non-professional may not have been able to spot. They can then decide whether to work with them and how much credit can be comfortably offered. It’s easier this way to identify customers that will keep up with their payment terms and pay invoices on time.
Outstanding invoices means that the company has less money than expected and perhaps insufficient funds to pay bills on time. This is money you expected to be in the company already but due to late payments hasn’t arrived yet. Since your credit controller will have followed the payment from start to finish and has been solely responsible for it. The process will be much more efficient and easier as they’re aware of the whole situation. They’ll know the correct procedures to chase payment and what legal actions to take when. This will ensure clarity and make sure bills are paid to you in a timely manner and done professionally and efficiently so.
Cash flow is especially tight for SMEs and outstanding invoices from your customers can have a detrimental effect on your operations. Implementation of good credit control procedures ensures money goes in and out of the company at the time it is supposed to. Therefore a good credit control team can overlook your finances to spot any irregularities and keep on top of your books to spot any early sign of problems and prevent them from happening. This means you can relax and know your bills are paid on time and there is enough cash in the business to ensure your company has a good financial reputation and is credit worthy. They can also deal with your suppliers who may be chasing you to pay on time so you don’t have to.