Overview of Credit Control
This overview concentrates on payment and debtors, as opposed to systems and procedures of accounting.
If a Credit Policy has at it’s heart sound decision making, Credit Control has ‘control’. This point is often overlooked by companies that push every sale and ‘wait and hope’ for debtors to pay invoices on time.
The ‘control’ does not start with receiving a delivery note, an order, or whatever procedure is used to notify credit control of a customers purchase. The control must start with a level of authorization/involvement in agreeing real-time credit limits and periods: sales staff, sell and credit control, controls. The next stage of control is to raise an invoice a.s.a.p. and certainly within 72 hours: the invoice payment is controlled by a visual time limit, say 30 days, and your credit policy (which the customer has a copy of) sets out the conditions and penalties in respect of every invoice raised.
Where possible, further control is established by calling the debtor after 48 hours to confirm: goods/service received, no problems exist, and invoice received and set up for payment. Where payment has not been received, to a maximum of 72 hours overdue, a call, a visit or letter (depending on industry and goods/service) is initiated to control and establish a new time-table for payment, say a further 48 hours.
If after the extended period no payment has been received further action needs to be taken immediately: there is little point in saying “let’s wait and see what happens”, as nothing will happen. Another visit, a telephone call, or a letter that escalates your urgency is required at this stage to show the debtor that you still control the situation, if not the actual payment.
You may suggest part payment now, the balance in 7, 10 days or even take some goods back (this option is not used enough in my opinion). If you have still not received the payment after one to one negotiation you have to accept you have a
Debt Collection.
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