Having a large amount of debt in your business is bad for cash flow, weakens your overall financial health and brings down your credit score as a business. Not to mention the rising stress levels when trying to manage your own creditors on limited cash flow.
When customers don’t pay on time, that ‘aged debt’ is bad news for your finances. Aged debt can begin to stack up, adding to your liabilities and reducing the health of your overall balance sheet – so it’s important to tackle late payment head on.
Get effective with your credit control
Being proactive with your credit control procedures and debt management helps you speed up payment, reduce your debtor days and rein in your overall debt as a business.
To improve the efficiency of your credit control:
- Make your payment terms clear – state your payment terms on all invoices and create a credit control policy that’s part of the terms & conditions that customers sign up to. Make sure you follow through with any credit control policies you set in place so customers know that you are serious about being paid on time.
- Run regular debtor reports – check your list of late invoices to see which customers are the late payers, and where the big debts are that need to be collected. If it is always regular customers that are paying late, consider putting them on a direct debit payment option.
- Be proactive in chasing late payment – we all hate asking for money, but don’t be shy about asking a customer to pay their bill. After all you have done the work already! Set up notifications and schedules to remind yourself to chase late-payers and follow through consistently.
- Automate your credit control tasks – cloud accounting platforms have built-in tools or automated credit control integrations that can automatically chase your late-paying customers as soon as an invoice is overdue. There are many options - sending regular scheduled invoice reminders, statements and even make customer calls on your behalf.
Talk to us about enhancing your credit control
If late payment and aged debt is weighing heavily on your stress levels and balance sheet, we’ll help you set up the debtor reports and credit control processes needed to reduce this debt.
Get in touch to improve your credit control.