All successful business owners know that effective credit control is vital to their company’s success.

Despite this, many companies are still making the same mistakes.

Here are 5 common credit control mistakes that we see regularly, plus tips on how to avoid them to ensure your business can avoid the challenges that continue to be posed by customers’ poor payment practices.

1. Lack of strategy

Whilst in theory the process should be easy – you supply a product or service, send an invoice and then get paid – in reality it can be a lot more challenging. This is why it’s essential for all businesses to have a robust credit control strategy in place. 

So, clearly set out a day-by-day strategy and make sure you train staff appropriately so that all stages are adequately completed and meticulously stuck to.

It’s important that you remain consistent in your efforts at all times to achieve the best results. If you apply strong credit control processes for a short period and then slacken off, you’ll lose many of the benefits.

2. Failing to get to know customers

Many businesses offer credit without ever getting to know who exactly it is they’re lending money to, putting their own cash flow at risk.

Credit reports allow you to instantly check a company’s credit rating online, allowing you to make quick, informed decisions about who you do business with, reducing the risk of late payment.

This is a vital step at the beginning of your relationship when the first order is placed, but it should also be an ongoing task. It’s always worth remembering that even the most reliable customers may have a change in circumstances which could affect their ability to pay on time.

A low credit rating should never be ignored; adjust your terms accordingly – or at the very least take extra caution when offering credit.

Always remember that when you offer more credit late payment carries heavier consequences, so use the information gained from credit reports to set credit limits for each customer. This will stop your customers purchasing more than they can afford and protect your cash flow.

3. Invoicing incorrectly

Your invoices are essentially your key to getting to getting paid. Failing to send one, or sending one with mistakes, provides an easy excuse for your customer to stall payment.

So, always proofread for grammar, spelling and mathematical mistakes before sending to your customer. 

And make sure that you send it as soon as possible, as any delay you make could give your customer an excuse to stall payment.

It could even be worth investing in automated technology to speed up the process and remove some of the burden from your credit control team.

4. Getting the tone wrong

When it comes to credit control, you need to be firm but fair. Being aggressive towards customers is unnecessary and could damage relationships and your brand. But at the same time, you don’t want to let customers walk all over you or force you into accepting poor payment practices.

You can set the tone early on by making it clear in your Terms & Conditions at the outset what your late payment procedure is. Often this acts as a deterrent.

Many businesses are reluctant to follow through on these late payment procedures as they fear the customer will take its business elsewhere. But there is no point in having a customer who does not pay. Plus, by detailing your process in your terms and conditions you have given them fair warning.

5. Trying to do more than you can handle

Given how challenging and time-consuming the credit control process can be, it’s not surprising that some businesses are struggling to keep on top of it. 

As debts get older they become harder to collect which can consume a great amount of your time and resource. Outsourcing these overdue invoices to a specialist debt collection agency will remove the burden from your business and also bring their expertise to the process.

You can even outsource your entire credit control function to regain the time to focus on your core activity and growing your business.

Alex Hilton-Baird, Managing Director, Hilton-Baird Collection Services