Sometimes, the most difficult aspect of running a business is collecting debts on time. Because collecting debt is such a sensitive job, it often has to be done proactively. With effective credit control, your business can continue to stay afloat even through tough times.
When it comes to debt, falling behind on collecting what’s due can lead to business struggles such as staff wages, payroll taxes and supplier payments. While many businesses may use bank overdrafts to manage cash flow, this is not a long-term answer. In fact, many banks are now refusing to allow businesses to use overdrafts. Not only do they cost more money in the long run, but they actively reduce existing overdraft limits for small businesses.
With effective credit control, businesses may bypass these financial struggles. Below are some of the most powerful credit control tips for small businesses.
1. Send Invoices on Time—and to the Right Person
Simply put, sending invoices on time is powerful for maintaining credit control. While it sounds obvious, many businesses fail to do this.
Instead of sending invoices through the mail, try sending them via email. Emailing bills and invoices are much more effective when sticking to a timed schedule. Additionally, make sure the invoice is sent to the individual responsible for authorizing and paying the bill.
2. Make Sure Terms Are Stated Clearly on Invoices
This again seems obvious, but you’d be surprised at how often terms aren’t stated clearly on invoices. All terms and conditions should be unmistakingly clear on any bill.
As an added tip, request a payment be made in 14 days instead of 30. Many times, individuals make payments after the posted deadline. So, if you absolutely need a payment within 30 days, request it in 14 days.
Additionally, do not offer discounts for early payments. Many times, individuals will take the discount and still make a late payment.
3. Run Credit Checks for Customers and Set Credit Limits
A powerful tip in maintaining credit control for your business is to run credit checks on new customers—and regular checks for existing ones. Many times, businesses don’t realize a client or customer is financially struggling until your bill goes unpaid.
Additionally, setting credit limits for companies is effective in maintaining credit control for your business.
4. Ask for Payments in Advance
This is especially true if your business is planning for a large project. Establishing advanced payments will act as a security blanket for you and your business. Agreeing on advanced payments also ensures your suppliers stay paid.
5. Chase for Payments by Email, Letter and in Person
A powerful tip in maintaining credit control for your business is to have set dates to chase debtors. Try to expand communication through as many mediums as possible, whether by phone, in-person, in writing, or digitally.
Most companies send out payment reminders on 30, 60, and 90 days. Set these days aside for your credit controller to regularly visit customers who are in debt. When businesses set days aside to chase customers for payments, any disputes on bills or invoices are received early. This helps exponentially when maintaining credit control for your business.
6. Meet Your Clients and Customers—in Person
One of the most powerful methods to maintain credit control for your business is to visit your customers face-to-face. By regularly visiting your customers in person, you will get to understand them and establish a relationship. When you establish a relationship with your customers, you are more likely to receive your payments on time.
Many businesses fail to realize this powerful tip. Building relationships with your clients will establish trust and integrity, which promotes them to make payments on time.
7. Hire a Debt Collection Agency
Hiring a debt collection agency, especially for older debts, is powerful in maintaining your business’s credit control. Many companies hire a debt collector after 90 days of no payments, and others longer. However, it’s extremely important to hire a debt collector sooner than later. Statistics show that the longer you keep the debt, the less likely it will be paid.
However, hiring a debt collection agency takes careful consideration. To maintain the reputation of your business, make sure the debt collector practices with compassion, kindness, and professionalism. Southwest Recovery Services is a fantastic debt collection agency that adheres to important debt collection values.
8. Check Debtor Days Each Month
A powerful way to maintain credit control is to check your progress monthly by calculating the ratio of debtor days. Debtor days are the average time it takes to pay debts.
If debtor days increase, it points to needing to find underlying issues. As a tip, you want to have debtor days of 30. This ratio helps indicate performance for credit controllers, as well as award incentives for better debt collection.
Above all else, the most important debt collection technique is to prioritize the relationship between your business and its customers. Businesses with good client relationships see less instances of debt.
Southwest Recovery Services
We collect debt with compassion, professionalism and empathy. Southwest Recovery Services understands the importance of maintaining relationships with your clients, and that’s why we operate with your reputation in mind. To learn more about how we can help collect a debt, contact us today.