An efficient credit control strategy is crucial to the success of any business. After all, this policy ensures you get paid for the products and services you provide. Unfortunately, the credit control process can be quite complex and time-consuming, which is why many business owners struggle to stay on top of it.
As a result, they end up committing several seemingly innocent mistakes that actually put their company at risk. Below are three of the most common of these blunders.
Critical Credit Control Mistakes
1. Having unclear or outdated payment terms
Vague payment terms leave a lot of room for error. Clients will most likely miss out on their payment dates because they forgot or were unsure when they were supposed to pay. The more unpaid or overdue invoices you have, the harder it will be for you to maintain a positive cash flow.
Take time to review and update your payment terms so that you can make them more specific. Include the exact date when the payment is due and make sure this is prominently displayed on the invoice. This way, clients will not miss them and you can avoid any disputes.
2. Not understanding your client’s invoicing needs
Many companies make the mistake of assuming that all their clients have the same invoicing requirements. So, they end up providing uniform invoice formats and payment methods, completely ignoring the possibility that the client might need something different. This mindset will inevitably bring you problems when the due date arrives and your invoices are left unpaid.
Remember that each client is unique. They have their own internal processes that they consider and these things affect how will be paid. For instance, they may have a lengthy turn over time for a purchase order and until that PO is approved, they will not be able to pay you.
Make it a point to ask each customer what their invoicing needs are. Perhaps they may want a longer turnover time or a different payment method than what you usually provide. This way, you can make the necessary adjustments and ensure timely payments.
3. Ignoring problem invoices
It can be such a hassle to deal with late payers that it often seems easier to just ignore them. But sweeping problem invoices under the rug only makes matters worse as you are covering up a critical cash flow issue. Sooner or later, you will end up with a heap of unpaid invoices and a depleted bank account.
Make sure you have a clear process for flagging bad payers and problem invoices. Create a plan for evaluating them so you can understand what’s going wrong and find out what you can do to avoid them in the future.
How to Avoid These Mistakes
The good thing about these mistakes is that they are absolutely preventable. Taking a few simple preemptive measures can help you strengthen your credit control procedures and secure your cash flow. You can start by hiring professionals to review your existing credit practices so they can help you identify the areas that must be improved.
Our team here at Slater Byrne can do exactly this and more! Aside from helping you improve your credit management system, we can also assist in updating your Terms & Conditions to ensure it fully protects your business interests.
Contact us today at 1300 794 290 to learn more about our credit consultancy service!