A business credit control system is a strategic system that ensures that the services or products you provide to the customers on credit are paid for. This system identifies the types of debtors to give them a different time of payment. This determination means that the customers with a strong credit history are provided with a longer time for the repayment of the line of credit, and the customers with a weak credit history are asked to make payments as soon as possible.
Credit control is also called credit policy and credit management. Credit control is essential as the whole business’ success depends on sales, but sometimes having high sales does not mean that you have cash in the business as, without credit control, credit sales turn to irrecoverable and bad debts. Controlling credit also makes your cash flow positive or balanced.
With credit control, your accounts and finance stay managed, the risk of failure decreases, and the business owners will be free from the stress of having to worry about accounts receivable. The duties of a credit controller are managing and collecting debts from company debtors, setting up terms and conditions of the credit, processing payments and reconciliation of invoices, and ensuring timely payment of debts.
The job of a credit controller is very challenging and full of obstacles as dealing with customers can be very hard. Sometimes the customers do not tell the truth, and you end up with late payments again. Sometimes, the situations get out of your hands, and you can’t control them. Here are a few tips to control credit effectively:
- Make sure that the credit-control process is organized. The first step to success has clear and managed records. An essential factor while controlling credit is to make a precise and proper timetable which should include all the debtors, the time of sale, and the time provided to the customer for the payment of your product or service, do not forget to mention the contact details of the debtor to avoid panic at the time of payment.
- Make policies and follow them. While controlling credit and introducing the Credit Control System to the business, you should create a policy and procedure document and follow it. This documented procedure will also help others to understand the policy.
- Keep a background check on the credit history of your customers. If your customers have a strong credit history, you can give them an extension for the payment period, and customers with a weak credit history should give them a lesser period to pay you. You can also offer discounts over early payments to encourage customers to pay timely.
- Communicate with your customers. It is imperative to get all the contact information about your customers to inform them about your terms and conditions. Schedule calls for your customers to keep them updated and to remind them about your payments. Tell them about your new offers and deals about early payments and inform them about your credit history.
- Send invoices to your customers through the internet. Sending electronic invoices to customers is an innovative idea to save the cost of ink and paper, and it is also easy to manage and will be sent to your customers quickly. You can also mention all the details about your policies to make them agree upon your terms. This agreement can also prevent or decrease late payments. Invoicing is also very good for your cash flows and helps you manage your finances properly.
A few benefits of controlling credit are that it saves time if you follow a systematic process. It even saves your money as you will get many payments when you keep track of your payments and invoices. You can manage your risks, too, as irrecoverable debts are a significant factor behind failed businesses.
Credit control is also a key to sustaining growth. A credit controller should be very well organized and skilled to do this job with ease. The tips mentioned above are handy if followed the right way and are practical too.About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.