Getting Businesses to Understand the Importance of Credit Control & Credit Management Practices.

Businesses are too busy trying to do business, it’s all sales, sales, sales.  Build a sales force, increase your marketing and web presence and get your corporate identity out there!  Very few business people think when setting up a business or more importantly when it is in a growth stage “I wonder how I’m going to manage my sales ledger, debtor days and client risk”.

Most business I see tend to be in the owner manager market space which means the credit management practises are;

  • None existent
  • Carried out by the owner manager
  • Carried out by someone who has had this tacked on to their job role but isn’t a specialist

Value is in the eye of the beholder, ok maybe that was beauty but the point is, if the owner does not see the value in a robust credit management process then money will not be spent on specialist resource.  This usually means that debtor days are in excess of industry standards and the business is at a much higher risk of bad debt.

Changing minds and perception of the value of credit control processes usually takes a milestone in a business timeline to affect these changes.  Typically these are;

  • Shortages of cash within a business
  • Bad debt
  • Increased borrowing to fund cash flow
  • The company’s bank intervening
  • The company’s accountant pointing out how bad the situation is

At this point in a business’s life span the owner or directors will understand the importance of assessing the risk of their debtors, paying attention to collecting their debt pro-actively and paying for someone to take on their credit control.  They will see the value in spending money to ensure their money is collected to terms.

At the point where a business realises it needs to act the sales ledger and the companies debtors need some work to bring them back in line.  A credit controller will need to ensure new process are put in place and build relationships with customers to ensure outstanding monies are paid to terms.  Its not just down to a credit manager/controller to ensure debtors pay to terms.  Employing ethos across the company into the sales people is key, ensuring you are dealing with credit worthy customers.

Many businesses look to employing a part time credit controller in-house, which can be effective but can come with its flaws when queries are made on a day they are not there.  Others will look to outsourcing specific elements of the credit management process to specialist credit control companies who activate the process of proactively chasing invoices before they become due and reducing bad debt.

This article was published in the January 2018 CCR Magazine on page 12. Please click here to view.

Gareth Fawke – Director

Inksmoor Finance Group Limited

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