Written by Adam Stewart
As a Debt Collection Expert and owner of Debt Recoveries Australia and ADC Legal, I come across a lot of SMEs and so I get to see a lot of the internal credit control procedures put in place. Some good, some not so good.
Financial controllers, Accounts Receivable officers, bookkeepers – anyone who collects debts within your company faces the same problem, which is how to get the money back quickly and efficiently with the least amount of time.
So, I’ve come up with my top 10 credit control tasks you can complete before you send the debt to a debt collector:
1. Prevention is the best cure
Maybe I am telling you what you already know, but the best strategy to deal with outstanding debts is to try to ensure they don’t happen in the first place. Put strict penalties on your invoices and contracts for non-payment. Ask for personal guarantees. Do a full credit check on your prospective customer. See this link for some free penalty clauses and templates you can use: https://debtrecoveries.com.au/credit-control-free-template-pack/
2. Review your invoice
When was the last time you reviewed your invoice? Do you offer the most appropriate payment methods for your market, and how clearly are these stated on the invoice? Design is important in a range of business aspects, but it can also make a huge difference to encourage prompt payment.
For instance, are your credit terms clearly stated? Can the customer see exactly what they’re being invoiced for? Could you make things even clearer? Take the time to compare your own invoice against others you receive to see if you could try something new.
3. Have a credit policy and stick to it
This is basically your terms of payment. It can be as simple as stating how many days your customer has for payment and what you will do if they do/don’t pay. E.g. You may give a discount for early payment or you may charge interest for late payment. If your company does have a credit policy, ask yourself how well you know it? If the answer is ‘not very well’, how can you be following it? Take the time to read back through it and make sure you’re following the steps. Credit policies are there to help you and when done right, should be based on best practice to improve performance.
4. Contact customers BEFORE the invoice is due
Calling or emailing a customer a few days before payment is due can be one of the most productive exercises for a credit controller. As well as bumping your invoice to the front of their mind and ensuring it hasn’t been misplaced, it will often encourage them to pay it within terms as they won’t want the awkward conversation the day after it exceeds terms asking where payment is.
It will also help to identify customers who are genuinely going to struggle to meet your due date and allow the company’s cash flow forecast to be adjusted. After all, no-one likes nasty surprises.
5. Contact customers immediately after the due date
Seems obvious, but many of my clients don’t actually do this step, preferring to just let it ride, or outsource to us instead. However, sometimes all it takes is a phone call or a personalised email. Contacting them on the due date sends a strong message that you want payment on time, not the day after the due date. Set up automated emails to go out just before and just after an invoice is due. Both your emails should have a friendly, gentle reminder of your strict terms of payments, as outlined in point 1.
6. Pick up the phone
OK, so it’s not 1982 and we don’t actually pick up the phone and dial anymore, but you get what I mean. Don’t be afraid to ring your customer. This sends them a strong message that you are firm about your terms and that you take account receivables seriously. Remember, friendly, yet persistent. Your tone should be much firmer when discussing invoices which have been overdue for a long time but keep it friendly.
Ultimately, the exercise should be used as an opportunity to get the latest on why the invoice hasn’t been paid, reaffirm how important their payment is for your business, resolve any disputes that may exist and explain the steps your business will have to take if payment isn’t received soon.
7. Review your sales ledger
This is arguably the most important job for a credit controller. If you don’t know the status of each invoice and customer, it’s almost impossible to take the right action at the right time. Get into the habit of doing this every morning and use it as a tool to plan your day.
Focus on the invoices which have exceeded terms – getting payment from these customers has to be your number one priority as the longer their invoices go unpaid, the more difficult they’ll be to recover.
8. Credit check long-term customers
Many businesses will have a large proportion of repeat customers who you’ve been supplying for several months or even years. But whilst you probably credit checked them when they made their first order, when was the last time you did so? Two of the top credit reporting companies in Australia are Equifax or illion Express.
Take the time to credit check those long-term customers to get a more up-to-date picture of their business. Credit reference agencies have subscription models to maximise value for their clients, whilst it’s also possible to credit check businesses on an ad hoc basis.
9. Train yourself to be a better credit controller
It’s extremely easy for us all to get set in our ways and tell ourselves that the way we do things is the right way. But when did you last receive some proper credit control training?
Whether it’s a seminar held externally or you get someone in to talk to the whole department, training can be an excellent way of identifying new methods to improve results and put to bed any bad habits you might have gotten into. Try getting involved in AICM ( Australian Institute of Credit Management). They have plenty of training courses available and lots of professional development courses.
10. Outsource to a Debt Collection Expert
The longer you spend on unpaid invoices, the less time you’ll have to ensure other customers don’t follow suit. This is where it can be useful to call on the resource of a specialist debt collection agency, as they’ll take on the burden of recovering payment and use their expertise and weight to secure the money you’re owed quickly. Call our partner agency Debt Recoveries Australia on 1300 799 511 or email them at firstname.lastname@example.org
Call Us: +61 1300 799 820
|ABOUT THE AUTHOR|
Adam Stewart has worked in the fields of motor vehicle insurance and debt recovery for over 12 years, working with some of the largest insurance and debt recovery companies in Australia.
In 2002, he established Debt Recoveries Australia Pty Ltd, a debt collection agency specialising in the insurance claims industry. Adam is also the owner of ADC Legal, a legal practice specialising in commercial advice and litigation, debt recovery and insurance claims recovery disputes.