I’m not really sure how many parts this will stretch to but lets see how we go! Getting the customer set up with credit facilities is probably the easy bit (but dont overlook it and do it properly!). Now that the customer is trading with you they have now become a debtor to your business.

When they order any goods or services please make sure that invoices are sent promptly as this is very important in the overall credit control process. It is also important at the end of each calendar month that you send a statement of account which shows all of the invoices issued in the last month and essentially shows what your customer owes you.

There’s no point in beating about the bush here. The harsh reality is that a significant number of customers will not pay to your normal terms despite agreeing to them and your best attempts to highlight this to them throughout the credit application process. If all you had to do each month was send the customer a statement and then they would send you a cheque by return then life really would be easy

Credit Control Process

As I’ve said before the statement is the first key component in the credit control process and you need to make sure these are being sent out as timely as possible after month end. As an invoice approaches being due (say 3-5 days beforehand) you should start a basic credit control process which involves a small series of letters followed up with phonecalls in between each. I’ve detailed a very simple process below:-

• Letter 1 – Sent 3-5 Days prior to invoices being due. Very sincere with a soft request for the customer to arrange payment when invoices become due.
• Phonecall 1 – Try and make this as soon after the invoices become due as possible but not before. Again, this should be a very soft approach. Ask the customer if they have received their statement and have all the invoices on their system. Deal with any queries or requests for copy invoices promptly. Ask for a payment date and what method of payment they use (i.e will it be a cheque or electronic payment)
• Letter 2 – Sent 7 days after invoices have become due. This should remind the customer that they have an overdue balance that is outwith normal terms of business. You could also attach another copy statement if you think it will help.
• Phonecall 2 – You may experience people being out of the office or asking to call you back so as much as we are saying this should be your second call the ultimate goal here is to make as many calls as possible so that you have a confirmed payment date or you have the details of when the payment was made.
• Letter 3 – Sent 14 days after invoices have become due. Should be headed up final reminder and refer to previous correspondence sent. Payment is now seriously overdue and you expect payment by return.

We’ll leave the process here for now. I’m sure many people maybe find the above a bit too harsh and all I will say is this is merely a process that can be tweaked to fit the needs of your business. On the flip side though effective credit control is all about being persistent. On of the best lessons I learned when I first got into credit control is not to be a bank to your debtors – Always remember it’s your money!

What process do you follow in your business? Do you think the above process seems harsh? Have we missed anything out? Share your opinions with us through the comments section.