Credit checking existing customers
The same applies to existing customers or suppliers - their financial situation can change quickly, and without a credit check, it could go unnoticed. Even a longstanding business customer with no history of late payment can suddenly decline, and seriously jeopardise cash flow for the creditor business.
Clear payment terms
Clear payment terms should appear on all relevant business documents, including invoices, statements, reminders, and contracts. This includes the deadline for payment, and the interest rate that becomes due on late amounts.
Not only does this remove any doubt about a business’ payment requirements, it reduces the opportunity for a debtor to deliberately query an invoice due to lack of information. Stating the intention to charge statutory interest on late payments can also encourage customers to pay on time.
Operating with a clear and actionable system for chasing payments – reminders, phone calls, warning letters at set points, for example – helps the business to bring in cash and enables members of staff to easily follow procedures.
Reliable management information
A strong credit control function can feed reliable information into management software, providing business owners with the accurate data they need to make decisions. Knowing the number of days it takes individual debtors to pay is important, for instance, as it shows any pattern of late payment that might be emerging.