‘Credit control’ is the system used by a business to make certain that it gives credit only to customers who are able to pay, and that customers pay on time.
Credit control is part of the Financial Controls that are employed by businesses to ensure that once sales are made they are realised as cash or liquid resources.
Credit control is usually an afterthought when an invoice has gone unpaid or a customer’s account exceeds a set credit limit.
Follow your bad debt procedure:
- Gather your evidence, invoice, proof of delivery, contract terms.
- Send a Statement to your customer with a letter asking for the money (Letter 1)
- If you get no response in the time frame set out in the letter, send Letter 2, send by post and email attachment.
- Call the customer to check they received the letter.
- If they still do not pay you, then send Letter 3 detailing the Interest and costs they will incur if the debt is not settled.
- Two days later file the claim on the Government website.
The defendant options are:-
- File an acknowledgement of Service (28 days to file a defence)
- Dispute the whole claim.
- Admit that all the money is owed.
- Not reply at all.
Then if they take option 2 or 3 we are off to court!
Prevention is better than Cure
- Real Credit control should prevent the CRISIS happening.
- Credit Control should start with the sales process. Define your customer.
- Do a credit check or at least download the last set of accounts filed from Companies House.
- Set a credit limit or ask for payment with order until a credit history can be established.
Tools you need
- The most basic tool you need to manage your cash flow is your Aged Debtors report.
- A file to keep all your invoices and correspondence for your customers.
- This can also be done using a CRM system.
- You need all this information because it is evidence should you need to go to court.
If you need more information please contact contact me directly by phone: 01483 453755.