Credit Control Basics
Cash Flow Control‘ should utilize your Credit Policy Management‘ to receive, record, maintain, and most importantly, control your credit sales.
Credit ‘Control’ is just that: controlling your company’s credit. When you no longer control your debtors the cost of financing your company’s cash flow is at the mercy of those very same debtors.
There are three elements to good control:
a) System
b) Procedure
c) Staff
New Account Credit System
- Credit Application from New Customer with Order
- Credit Report/Check – Credit Policy Standards & Assessment
- Credit Approval of Customer – Analyze Information
- Set Credit Limit Table for Risk Assessment and Terms & Conditions of Sale & Service
- Input/Set-up Customers Details Correctly
- Raise & Post Welcome Letter and Terms & Conditions
- Goods Delivered/Service Provided
- The Invoice in Credit Control Raised, Sent to Customer
- Invoice Paid
- 2nd Order Received
- Credit Approval
- Invoice Raised, Sent to Customer
- Monthly Statement, Sent to Customer
- Invoice Paid
However your system works, the important factor is that you have a system:
- everyone easily understands and uses:
- that it is a workable system
- that you can easily find out at what stage a sale is within that system:
- the system is capable of accepting or rejecting a sale, with a reason provided
Credit Procedure
Each of the area’s in your system needs a specific and detailed ’step by step’ written account of how to receive, initiate, produce, control, and forward any given task to ensure the optimum operating system. Preferably in the form of a company procedure manual.
By implementing a credit control procedure manual you are enforcing your company’s individual characteristics. You are showing you have management and company values that will inform your customers that you have presence, confidence, diligence, and that you are prepared. Companies that have these values are less likely to suffer from The Final Stage of The Late Payment of Commercial Debts Act (1998) or bad debt (Aged Debt Analysis).
Ongoing Credit System
Whether your sales ledger is computer based or manual, a clear and simple system and procedure is required to:
- receive orders
- confirm credit status
- raise invoices/credit & debit notes
- receive payment
- identify/resolve queries
- identify & measure deficient accounts
- produce & follow-up default remedies
Our FREE business start up software will help you operate and understand the basics of good credit management.
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