Credit Control for Small Businesses, Getting It Right

It will be obvious to any business owner that the answer to this lies in striking a balance somewhere between the two extremes of being overly aggressive or too passive in your credit control methods, some companies I have had personal dealings with have sent me demanding reminders for payment even before the payment deadline has been reached which just makes me dislike that company. Indeed despite my own beliefs I also made them wait until the last possible moment in some attempt to redress my annoyance, on the other side of the coin there have been instances in my own business of forgetting about an invoice due and remembering and paying it only following a reminder. Aggression in credit control should be controlled if you want to keep your clients as customers, however a certain level of aggressiveness is required if you are to maintain cash flow and stay in business, there lies the big question of how to manage your credit control activities to everyones benefit.

The right formula.

If only there was a magic bullet for this, however there is not a universal answer that fits everyone, really there exists a range of solutions and some will fit better for you than others in your efforts to keep cash flow positive and making sure your clients are smiling.

Outsourcing

Outsourcing your credit control will be an answer for some, contacting out your invoicing may relieve some of the worries, many of my clients who are large organisations have this as a sloution, however advising a small business to follow the same plan may not be the best advice to offer, in fact if i were consulting a smallish business i would not suggest this as a rememdy at all, the nature of a small business usually means that there exists a relationship beween company and client and dealing with a third party could harm that relationship.

Software Solutions For Credit Control

Credit Control Software is another option often touted and works brilliantly for all sizes of companies, the software can send the reminders as set by you and does not make mistakes of sending too early, or forgetting that account that was questioned. Control is maintained in house and should a client have particular issues it is possible for the company to either over ride the software or input the data to allow the software to cope with the issue. Some software solutions can be complicated and expensive but some are very affordable for all but the smallest businesses, look around before diving headlong into a purchase and you will find a perfect match for your needs and budget, just ensure that the software you buy into is scalable so it can grow with your business.

Invoice Factoring

Think of this as selling your accounts to another company, basically they buy your debt from you for a pre arranged percentage giving you immediate cashflow, your customer then has to pay to the factoring company and all credit control is undertaken by them. An example of this is if you get a factoring company on board, your invoices carry their payment details and contact details, you bill your client ten thousand dollars and send the invoice, one to client, one copy to the factor, the factor then pays you immediately the ten thousand less their pre arranged percentage and they get paid from the client in 30 days or whatever the terms are. Once invoiced the account is no longer your worry, the factor deals with everything including chasing, reminders and non payment.. This works because once invoiced you are guaranteed immediate payment and you need not think about that account again, you are removed from the whole pay and bill process allowing you to get on with your own business.

Credit Control

Although each solution has attractions credit control software offers the most flexible solution without giving control to a third party, if you cannot afford dedicated in house credit control then software is the best solution for you. whther you choose to manage your credit control this way or not ultimately is not as important as managing it in some way, without management of this critical business function your business is doomed from the start.

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