How to Get Credit Control Right for a Small Business

Cash Flow is King

Its a question of cash flow
Its a question of cash flow

Small Business Credit Control – 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, personally I have had demands 2 weeks before the due date and have been royally turned off that company as a result. Indeed despite my own beliefs I also made them wait until the last possible moment in some attempt to redress my annoyance, conversely there have been occassions wher I have genuinely forgotten about an invoice to pay and therefore it only got paid when I recieved 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, the problem presented by credit control to the small business is self evident.


The answer is....

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.

Credit Control Outsourcing

Credit control can be successfully outsourced and may seem attractive to some small businesses with all the benefits that outsourcing brings, 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. 


Positive Cash Flow is Essential

Credit Control improves cash flow
Credit Control improves cash flow

Credit Control Software

Another possible solution is to use credit control software which is a great remedy for a small business, the software will not forget accounts, will not send anything other than what it is programmed to do and the content of all communication is matched to your relationships. 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. You may be thinking that software sounds mighty expensive and you are right, however particularly with credit control there are some extremely reasonably priced solutions available that could suit almost any size of company, simply shop around and you will find something that works for you and your accountant, the only proviso here is that whatever you buy make sure it can grow with your business and is not limited to any amount of accounts, if it is make sure any upgrades are affordable when the time comes. 

Invoice Factoring

This is basically selling your invoices to a third party at a discounted rate which means they have the responsibility for chasing the outstanding amount and you get immediate cashflow in return for discounting the invoice. 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.. A perfect solution for those companies that need to give long payment terms but can not suffer the cash flow issues that 90 day payment terms can cause, although losing a percentage is not ideal it does remove any additional costs in chasing payment and potential non payment.


And the very best credit control is...

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. No matter what way you choose to do it please do not neglect your credit control as no matter how much you turn over it is no use unless tyou are getting paid and preferably on time, control your critical business processes before they control you.

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