How to implement credit control in your business?
Maintaining a process by which a small business can give credit to customers who can afford to pay the bill at the specified time is advisable. If you are not careful in having a check on that, you and your business can face severe problems like not having reasonable control over your cash flow and budget.
When you employ a credit controller, the credit controller has to manage the business’s debts. They are responsible for recovering the business’s obligations by implementing various methods to approach the customer and enforce the process. They do the collections either from the company or the individual customers.
Credit control is anything you do to reduce the wait between supplying a customer and being paid. Your customer owes you, so you are extending them credit –, but you are trying to do it in a controlled way. Even though you need the money and the consumers should pay you on time, they said you could not be too aggressive. If not, they will leave you forever.
Credit control ensures prospective customers with a good credit history of making their debt repayments are preferred. It will give the company enough cash flow and liquidity to maintain its operations.
Credit control
Credit control refers to the various measures to ensure guests settle their accounts at the agreed time. Controlling credit is the credit manager or clerk’s responsibility, who is a member of the accounts department.
The credit controllers have to issue the invoices on time; therefore, the business must maintain a sound accounting system to remind you about the dates of the invoices’ issues. Accounts done for each customer show the outstanding balance in the ledger, so the bookkeeper raises invoices electronically and sends that to customers.
Another critical point here is to have credit management terms for different customers. Some customers will not have any problems making the payments, and others will find it challenging to make the payments. Therefore, you need to set up different credit terms for some customers in collecting the payments. Critical to set up other credit management techniques to balance the accounts that will eliminate the cash problems.
The problem with the finances of your company will be as follows.
You buy your goods and sell them to your customers. When purchasing your interest, you will have expenses like transport; you might have to modify the product slightly before selling.
The expenses will be
- Cost of goods
- Transport
- Labor to organize the product for sale.
If it takes a long time to get the sales and payments, you will have money issues that create a problem in the cash flow. Then you might look around for finance to meet your other expense. In that case, you will go over your budget as well.
Therefore, credit control is vital for your business to succeed and keep that going forever.