When you’re self-employed or running a small business, it is imperative you manage your income and outgoings carefully. You need your customers to pay you on time so you can manage your own finances and plan accordingly. Without a credit control system in place you make struggle to make a profit or worse still, your business could fail at the first hurdle.
When customers buy goods or services from you but pay for them at a later point, this is known as getting ‘credit’ from you. ‘Credit control’ is a term used to describe how your business provides credit and collects money/payments from your customers.
Only extend credit to credit-worthy companies
An often forgotten aspect of credit control is that you should only extend credit to customers who are able to pay, and that those customers pay on time Managing debtors helps to improve your business’ cash flow and will prevent you from paying excesses charges on overdrafts. Having cash in your own business account also helps with your own credit rating: your suppliers will extend you more favourable credit terms and periods if you can demonstrate an ability to pay on time, every time.
Credit control is not just about collecting cash or late payments from customers. You need to establish good working relationships with all your clients and customers which will make those difficult conversations better should they be late. In fact, a good relationship may well allow your customer to notify you of potential problems before they even occuer.
Ok, maybe that’s a little hopeful, but it can happen.
Start ‘credit control’ before you take on a new client
When you do take on a new customer, you should begin the process of ‘credit control’ right away: assessing their ability to pay on time, from day one, allows you to plan your risk strategy for that particular clients/customer.
Outsource credit control to your accountant or bookkeeper
The biggest issue companies and self-employed people have with credit control is time – whilst you’re working in your business it can be difficult to allocate time to work on your business. Payment deadlines get missed and suddenly you can find yourself out of step and often in difficulty yourself. This is where a credit control services from your accountant or bookkeeper come in. They can manage as much or as little of the process as you need, giving you the peace of mind that someone is keeping your cash flow in order while you are working. Another additional benefit is that for many small businesses, employing a bookkeeper full-time would cost far more than outsourcing this essential task to your accountant or bookkeeper.
If you’re thinking, “where can I find an accountant near me?”, look no further than The Financial Management Centre. With offices across the UK, we’re engaged by many small businesses to manage their credit control and other bookkeeping/accountancy services.