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Tips to Improve the Credit Control Process

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedMar 20223 min read

No matter your business’s size, money management matters. It’s essential to know when and where revenue streams are coming in. Yet even with the most meticulous accounting systems in place, customer payments are often beyond a business’s control. You can mitigate the risks of late payments with a carefully crafted credit control process. Here are eight tips to help ensure reliable and timely payments.

1. Run a risk analysis on new customers.

If you extend credit in any form, a background check is an essential first step for credit control. Even if you serve well-known companies, you’ll still need to run a risk analysis to analyze whether they pay their bills on time. Whenever you provide goods or services before receiving payment, you should first check the client’scredit score and payment history. Every business will have a different threshold for acceptable risk. If you do decide to work with customers with less-than-perfect credit, start with a small credit limit to build trust.

2. Establish clear credit terms.

Another important component of any credit control strategy is drawing up clear terms and conditions. These should be detailed, outlining payment terms likenet 30 or net 45, due dates, and the procedures that will be followed if payments are late. Create a contract for customers to sign and date before extending credit. This will serve as a legal document your team can refer to if accounts go to collections.

3. Keep communication open.

Beyond the fine print of contracts and background checks, credit control is also about building strong customer relationships. You should encourage an open line of communication so that a customer will be able to discuss the issues should any problems crop up. If you’re aware of reasons for delays, you’ll be better able to manage cash flow in the meantime. Be sure to keep records of all communication to deal with payment queries and disputes more effectively.

4. Make payment easier.

Gone are the days of paper checks and cash deposits – today, most businesses prefer to collect payment electronically. A seamless online payment process makes it as easy as possible for customers to pay you on time. It’s best to offer a variety of payment methods, while keeping in mind that some are more reliable than others. Credit card payments and push-based methods like bank transfers can fail for a variety of reasons, leading to issues with cash flow. Pull-based methods like GoCardless direct debit puts control in the business’s hands. Since money is pulled directly from the customer’s account, benefits include a reduction in failed payments and churn.

5. Incentivize early payment.

Customers love a discount, so one of the easiest ways to improve credit control and ensure on-time payments is by offering incentives for paying early. You could provide a small percentage off the total bill or throw in other freebies to keep customers on track with repayment. While it might seem like you’re giving away money, it often pays off when you avoid your own overdraft fees or time spent with collection services.

6. Know when to act.

In many cases, payment delays are due to forgetful clients. Be proactive in chasing up debts, sending automated payment reminders before invoices are due. When invoices become overdue, engage in polite communication. Highlight any late fees clearly so that the client knows exactly what to expect, and always offer an embedded payment link for easier payment. Ideally, you won’t have to escalate the issue with bill collectors.

7. Automate the collections process.

There’s no need to spend hours entering payment details into a manual spreadsheet. With an automated credit control and collections process, you’ll not only cut down on the busywork but also reduce manual error. This impacts every step of the payment process. A single error on an invoice can lead to rejection by the client and a resulting delay in payment. Keeping your records up to date also helps with tax reporting and more effective customer service. You can also set up automated email reminders before payment becomes overdue to avoid unnecessary delays.

8. Monitor existing customers.

Finally, remember that credit control is an ongoing process. Build periodic reviews into your strategy to monitor and assess risk of existing customers as well as new ones. If a customer has built up a history of on-time payments or improves their credit score, you could reward them with more favorable terms and conditions.

By taking the time to establish a strong, detail-oriented process for credit control, you’ll reduce late payments and enjoy a more reliable cash flow as a benefit.

We can help

GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.