Credit Control

It may sound obvious but making sure that you’re paid in full and on time is crucial to maintaining a healthy cashflow and, as the success of your business ultimately depends on it, it’s no overstatement to say that credit control is one of the most important processes for any business that offers credit to its customers.

 

Preparation is key

 

Ensuring that an invoice stands the best chance of being paid promptly starts before you even raise and send it. Check with your customer what information they want to appear on the invoice – they may trade under a different name, or they might need an order number displaying. Also check with your customer how they want to receive their invoice. While emailing an invoice is the most common, easiest and quickest method, not everyone checks their emails regularly. Likewise, an invoice posted to an office still closed due to staff now working from home may not get picked up for some time. This is also an opportunity to make your customer aware that your invoice is on its way. By checking this information at the start, you are less likely to encounter issues further down the line such as a request for the invoice to be amended and reissued, or a customer claiming it was sent to the wrong place.

Credit control bl

Also make sure that your invoice template clearly shows your accepted payment methods and that your bank details are also displayed. As well as your account number and sort code, include your full account name too, as many banks now run a confirmation of payee check. This means the bank account number and sort code will be compared to the account name, and only if they match exactly will the system allow the payment to proceed. This is a new feature designed to combat scams by preventing fraudsters switching a legitimate account number and sort code for their own.

 

You might also want to consider offering other ways to pay, for example by card or allowing your customers to set up a Direct Debit. Both these options can be set up in Xero and your customer can just click through to your payment provider when they receive their invoice.

 

It also helps if your payment terms are clearly displayed on your invoice, and any penalty for late payment, for example charging interest, is also clearly set out either on your invoice or, if applicable, in your contract.

 

Don’t let your customers forget

 

Customers pay late for a number of reasons, and in our experience one of the most common excuses is that they simply forgot. This happens quite often, especially with smaller businesses that don’t necessarily have any purchase ledger controls in place. The customer receives the invoice and they intend to pay it nearer to the due date but then it gets overlooked, forgotten or buried amongst a pile of other paperwork.

 

Dealing with these oversights promptly is vital. The longer a debt is left unchased, then the more likely it is that the customer will fail to recollect the details, and you may find yourself having to spend time digging through your own records to find information to support your request for payment.

 

Save time by utilising features within Xero & automate as much as possible

 

The accounting & bookkeeping software package that we recommend, Xero, has a number of built-in features that we’ve found really useful when undertaking credit control on behalf of our clients.

  • Xero’s dashboard – the dashboard in Xero is also really useful to see at a glance how much you are owed from overdue invoices. Then simply click through for a list of customers and the amounts owed
  • Statements – it’s possible to send statements directly from Xero that either list the outstanding invoices or show a summary of activity over a certain period, and in both cases the overdue balance is also shown
  • Automatic unpaid invoice reminders – Xero can email reminders to your customers on a set number of days after payment was due. Once this is set up there’s nothing to do, Xero will send the invoices automatically. You can customize the email text and can choose to exclude certain customers should you wish
  • Escalating an unpaid account – within Xero you can create different email templates to use when sending out copies of your outstanding invoices, and a series of emails can be created to send out in sequence, with the tone of the message gradually increasing to emphasize the importance of settling the account without further delay.

 

Keep notes & set reminders

 

Finally, when chasing payment of invoices, make sure you have a system in place which can remind you to follow up and check whether or not payment has been received. We use a customer relationship management (CRM) system called Capsule. Users can make notes to record details of contact with customers, and files can be attached too. It integrates with Xero so you can see your customers’ financial information without having to keep moving between the two systems, you can set reminders to review and chase unpaid invoices a few days or a week after making contact and, because everything is in one place, you and your team members have all the information to hand if the person dealing with the matter is away. There’s nothing worse than a customer phoning up to pay or to ask a question about their account and being asked to call back later as the person dealing with it is away from their desk at the moment.

 

In summary

 

§  Ensure your invoice templates contain all the relevant information and you’ve checked the invoicing details with your customer

§  Have a system in place which alerts you to invoices that are nearing their due date, and those that have gone overdue

§  Chase promptly – you’re more likely to be successful while the matter is still fresh in your customer’s mind

§  Review and follow up – don’t chase once and forget about it, regular contact with your debtors is more likely to result in payment

§  Keep records – use a CRM system like Capsule to maintain records that everyone in your team can access

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