Click here to visit the GREAT Yorkshire Directory for quality business suppliers in YOUR AREA

Credit Management Procedures & Keys Facts

Editors Note: Expert content needs an expert content writer and Yorkshire Powerhouse is pleased to publish this business advice article on Credit Management, Debt Collection & Recovery, kindly written by a real expert in her field – Anita Pickersgill from ICM Debt Recovery.

Please consider contacting Anita for any aspect of credit management or debt collection – just click on the advert links above or below – and please mention Yorkshire Powerhouse if you do make contact.

Whilst debt recovery is something most business owners recognise and often require, few recognise that debt recovery and credit control are intrinsically linked. Credit Management includes them both, but more often than not works alongside risk management.

When you understand what these processes are and begin to implement them as a policy within your business, it becomes much clearer how they all work together. For the purpose of this exercise however, we can break it down into its simplest format.

Know Your Customer

‘Know Your Customer’ is the start of your customer’s journey and it should be a seamless one.

You know your market, whether consumer or commercial.  It is important to know this accurately as these two customer types need to be treated differently.  A simple account opening form or basic order form that asks all the right questions will help you reduce the risk you are taking, particularly if you are going to supply on credit terms – see the download document on the right.

This can be a simple process undertaken via your website or by email.

FREE Credit Control Download Document:

Click below to download a FREE template document for customer account applications to use now:

Credit Control : New Customer Account Form

It is important for a number of reasons but do remember, if you don’t establish who is actually the liable party at the outset, then in the event of non-payment you are going to have problems.

Credit Checking/Risk Control

When you have established who your customer is and what they want from you, then establish how much credit they need, taking into account the cost to you, the profit margin and how long they need the credit for. You have to stand the cost until you are paid and it is you who will have to stand any VAT if you don’t get paid, until you can claim it back.

There are a number of free credit checking tools out there.  The Prompt Payment Directory is free to use – see the following link:

https://www.thepromptpaymentdirectory.co.uk/blog/tag/prompt-payment-code/

Companies House is free to check to establish if a business is still active, who the directors are and the company’s registered office: https://beta.companieshouse.gov.uk/

Credit reference agencies offer subscription-based services, you can also use debt recovery firms for one-off reports for minimal cost and your accountant may also be able to do them for you.

Terms and Conditions – Create a contract you can prove

Whilst a contract can be verbal and you can default to the government recommendation of 30 – 60 day payment terms, you will always struggle to prove your case if you have nothing to produce that might show what you agreed at the formation of a contract.

A good set of terms and conditions help you create a credible contract, they cover you in a number of ways and give clarity to your customer as to what they can expect from you.

Disputes do happen and your terms and conditions will be relied upon time and time again.

For some time now, a number of organisations have had to implement a ‘Treating Customers Fairly’ policy (TCF). This includes making everything very clear as to what you will deliver and what you expect from them. It is a good idea to have this approach in your business. Incorporating your terms and conditions into your website and your quotations should be an essential step. Whilst some fear this puts a customer off or gives your secrets away to competitors, in reality, it actually enhances your businesses appeal, as potential customers can see clearly what you are offering for the price you are asking.

Deliver the service or goods (or both) and obtain a signature or some form of confirmation you have done so. A photograph in situ provides a timeline and visual evidence. There are a number of ways to do this and is important you do this as part of your everyday procedures.

Invoice on time and send them when raised

Make sure your invoice is raised correctly. There are a number of things you must show to make it a valid document. Incorrect or invalid invoicing can be a big problem.

Credit Control Policy

Don’t just assume invoices will be paid on time. Set diary notes, call to see if they have been approved for payment, check for disputes and have a set of well-worded email and letter templates that escalate up to the debt recovery point.

Late Payment- what should you do?

If you have a good set of escalation and chase letters, use them consistently.  If you are more confident in calling and asking for payment then do so.  Keep full records of who you speak to and what they tell you.

The Late Payment of Commercial Debt Regulations are there for you to use, in respect of business to business debt. Remember step one above, know your customer!  If you know how to apply the interest and calculate it correctly along with the late payment fees work them into your letters. If you don’t, please don’t guess, make your own up or ignore it. Used correctly this is a great tool.

https://www.gov.uk/late-commercial-payments-interest-debt-recovery/charging-interest-commercial-debt

Your invoice is due from the date it is raised and it becomes overdue on day one after the last day of the credit terms allowed.

The cross over to Debt Recovery

When you have reached the end of your escalation process, which ideally should have ended with a seven-day letter advising them that the matter would be referred to a third party for recovery or, you have reached a point where you don’t feel confident or have the time to chase your payment; that is the point you move into formal debt recovery mode.

Every day an invoice remains overdue it eats into your profit, the longer you allow the matter to remain unpaid the harder it is to recover payment.

Having a solid set of credit management procedures will prevent a lot of debt issues but you need to follow them to the letter – if you’re struggling with credit control and debt collection then find a professional partner who can support your business.

Credit management guidance from Yorkshire Powerhouse

Now you’ve read our article on credit management – have you any more questions?

Here at Yorkshire Powerhouse, we’re happy to help as much as possible – is there anything else we can do to help you, do you have any further questions or can we help introduce you to an expert – please let us know:

Please leave this field empty.

Expert Collections - FREE debt collection service

Expert Collections Limited

ICM Debt Recovery & Credit Management

Please share this page with your own network to spread the word:

Yorkshire Powerhouse Limited is a company registered in England & Wales No. 10237925.
Registered address: 40 Gordon St, Slaithwaite, Huddersfield HD7 5LH