Late payment is a major problem affecting many businesses and can seriously affect the cash-flow of any business, throwing its very survival into jeopardy. Recent research conducted by the insurance company Zurich found that 53% of SMEs in the UK are owed money from late payments.
If your business had a credit controller and a credit control process in place this would naturally help reduce your debtor days – thereby freeing up cash for growth and also reduce the risk of bad debt. But what is it they actually do, and how do you go about implementing a process?
A credit control team's job should begin long before a sale is even made. It should ensure that your up-to-date terms and conditions are always supplied, as well as a suitable credit application form, to make sure you have all of the important details about any new customer right at the start of a trading relationship.
If the customer has a strong credit rating and looks to be a prompt payer then your credit control team will make a decision on the level of credit provided and suitable payment terms. After a sale is made, your credit control team will contact the customer before the due date to ensure they're happy and to confirm that payment will be made within the agreed terms. If the customer misses the deadline, the team is then responsible for keeping contact and recovering the funds as soon as possible.
Finally, the credit control team needs to regularly review the status of existing customers in order to minimise risk. Business circumstances change regularly and just because a company has historically been a good payer, it doesn't mean that their financial position can't change.
If you are looking to hire a dedicated credit control professional, look for personnel with a proven history in credit control, preferably within your industry or similar. Credit control is a specialist skill and not everyone is cut out to do it. Calling a customer to chase money can often be a difficult conversation and if you’re not careful you could easily upset them so you need to make sure you get the right person. It’s not just about collecting cash from late paying customers, good credit control is based on building relationships with your customers over time and creating a strong rapport with them.
You may also want to stipulate that this person has a credit qualification from the Chartered Institute of Credit Management as this ensures they have more than a basic understanding of the disciplines required.
The average salary for a credit controller is £25,000 but this clearly depends on training and experience. A qualified CICM credit controller would cost closer to £30,000 a year.
Often in SME’s, the proactive aspects of credit control are just not done, and reactively ‘chasing payment’ falls to a director or administrator. The reason is obvious, this level of cost is high for a smaller business to bear, and the business may not have the scale to justify hiring for this role.
However, the question is not “can you afford a Credit Controller?” It should be “can you afford to not have credit control professionally managed in your business?” What additional risks of bad debt are you accepting by offering credit to risky customers and not collecting it in quickly? How much could you reduce your borrowing costs if all your customers paid you on time?
Fortunately for smaller businesses, credit control can now be bought as a service on an outsourced basis.
Outsourcing gives you the option of using the service as and when the need arises, eliminating the need to employ specialist staff for whom you may not have a full time position. This is a key issue for any small business as it means you are getting an experienced credit controller but only for the hours you require!
We are passionate about credit our clients paid to their terms and believe that investing in an outsourced credit controller is an easy decision for any company to take. However, don’t just take our word for it – see what our clients say about us
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