Credit Management Tips

 In credit management

Credit control is one of the key strategies a business needs to improve its cash flow. Its is important that a small business learns and adapts effective ways of managing credit.


  • Efficient credit control starts during the sales process. You have to make sure that you have agreed upon the payment schedules with your customers so that they don’t take too long to pay back. Make sure that you understand who is going to approve the invoices and any other supporting evidence regarding the payment methods and schedule. This way you can time your invoices so that they arrive on time before the payment run.
  • Have a good and strict credit policy. This means you have to put limits on the amount that customers are eligible to credit and the time span in which they can pay back the debt. Making background checks of your customers as part of your policy also ensures that you don’t negotiate with defaulters. Defaulters can give your business a hard time, that is why you need to stand firm on your ground in order to make sure you are doing business with reliable people. 
  • Have a good set of terms and conditions. These should be drawn up by a solicitor and they lay out for the customer regarding their responsibilities.
  • Make sure your invoices are valid. You need to place the amount of any VAT, your VAT number, and also any other information that was required by the customer, such as a purchase order reference.
  • It is important that you keep track of your outstandings. If necessary you can call the customers before your invoices fall due to make sure that you understand when you’re likely to be receiving payment.
  • Make sure you’ve got a method to analyze the outstanding invoices. You can use all sorts of software to do this and most of the readily available packages will provide you an age report from which you can identify which invoices are due and which are overdue, so you know which you need to chase.
  • Send out a letter before you take action. It’s a final demand – it details the invoices that are outstanding and it’s a formal warning to the customer that they need to pay, usually within seven days, or else you’re going to instruct a collector or court action. 
  • Enforce your credit limits. Look for signs of customers are getting into difficulty, things like a slow down in payments or a change of address could all be telltale signs.
  • If you get a problem with a customer that can’t pay, be creative about what you’re going to do. For example, you could agree installment payments, or you could ask the customer to look at other contracts that they’re involved with to see if there’s anything that can be moved around to release funds to pay your invoices.
Recent Posts