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A sale is not a sale until the cash is in the bank!

We work with a huge number of clients who sell their goods or services on credit. This means that there is always going to be a delay between invoicing the customer and the cash coming in. Unfortunately, every now and again, we see businesses driven to the very brink of disaster when the cash dries up. However, equally as often, it’s not because their customers don’t want to pay, it’s simply because no one’s asked them to!

If you are looking at your customer list and working out who owes you the money, perhaps it’s a good idea to also look at your credit control procedures. Here’s our 5 point plan to get the cash rolling in:

  • Do you know who you are dealing with?

It sounds simple doesn’t it? For example, the individual you think you are selling to might actually be trading through a limited company. It’s no good sending out an invoice to Mr X, when the actual customer is Mr X Limited. So do your homework, get their full details on a credit application form and take up credit references.

  • What are your terms & conditions?

Make sure your customer knows what they are buying from you and when and how they are expected to pay for it. Draw up suitable terms and conditions (with help from your solicitor) which the customer can sign up to before you start selling to them

  • Keep your staff well informed

Make sure all of your staff know your credit control procedures and make sure they stick to them. There is no scope for “mates rates” and even less scope for “mates extended payment terms”!

  • Stick to your own rules

If your payment terms are 30 days from invoice, then make sure you have the systems in place to ensure that you can quickly chase up on any customers who don’t follow the rules. Using the right bookkeeping package can certainly help with this, there are plenty of great options available with cloud accounting – just ask us!

  • Watch out for the tell tale signs of trouble

Consistent late payers, random round sum payments on account or bounced cheques can all be signs of a business that might be in financial difficulty. If you find yourself dealing with customers like this, make sure you speak to them sooner rather than later. Set strict credit limits or refuse to continue supplies until you get paid. Whilst this may sound harsh you may find it helps you avoid a bad debt write off in the long run.

The golden rules for effective credit control has to be: set your procedures and crucially, stick to them!

For further help and advice contact Carol or Jeanette on 01768 864466.

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