Credit Control 101

Learn the basics of credit control and debt management by taking our free course below!

Lesson 1 - Credit Control Basics

Course Aim

The aim of this course is...

  1. to help you gain a basic understanding of credit control

  2. to help you implement an effective credit control system

What is Credit Control?

Credit control is the term used to describe the strategies a business uses to manage it's customer debt.

Customer debt is debt created by selling goods or services on credit to customers.

Invoices are provided to customers stating when and how much the customer should pay for the goods or services. Any unpaid (outstanding) invoices are referred to as customer debt, debtors, aged debt or aged debtors.

Why have Credit?

Offering customers credit can have a number of benefits. These can include...

  1. increasing sales

  2. attracting larger customers

  3. remaining competitive in the businesses industry

  4. strengthening customer relations

Now watch this video...

Lesson 2 - Approving Credit

Credit Applications

All potential credit customers should complete a credit application form. This form provides the business with all the necessary information to perform a credit check, create the customer account, invoice the customer and chase for payment. The application form is an important part of documentation and may need to be referred to in future.

Credit Limits

Credit limits are a great way to limit and reduce company exposure to debt. Credit limits should be agreed on each customer account and adhered to.

Credit limits can be calculated in a number of ways, including...

  1. the use of 3rd party credit software

  2. referencing the customers application form

  3. forecasting monthly revenues from the customer

  4. determining the businesses cash flow and current debt commitments

Credit Approval

Approving customer credit accounts usually entails sending an approval letter to the new credit customer. This letter should include confirmation of the approval, the customers credit limit, the customers account reference and details of payment terms.

Now watch this video...

Lesson 3 - Managing Credit

Policies & Procedures

The best way to manage your businesses credit control is to establish a number of written credit control policies and procedures.

These procedures should includes detailed information about all aspects of the credit control strategy, from new credit customer applications to pursuing legal action.

Policies and procedures should include details about how to perform the following...

  1. credit applications

  2. approving credit applications

  3. credit checks and referencing

  4. setting credit limits

  5. invoicing customers

  6. payment terms

  7. chasing overdue invoices

  8. pursuing legal action

Chasing Payment

There is a lot a advice I could give you about debt chasing and asking for payment. To keep things punctual though, below is a short list...

Use all methods of contact - don't limit yourself to emailing payment reminders. Good credit controllers use a variety of ways to contact clients, including phone calls, emails, postage, text messaging and even speaking with contacts in person! The best credit controllers find what works well for each client - some will pay with an email reminder, some with a phone call, some with a statement, etc, etc.

Take notes - make notes about everything and anything. The person to chase for payment, the outcome of your last conversation, dates the customers business is closed, birthdays, etc, etc.

***Credit Control is a thousand times easier with accounting software*** **Sage software is able to raise customer invoices, track invoices, record payments, create statements and much more!**

Click here for a FREE trial of Sage - NO CREDIT CARD REQUIRED!

Be friendly - always be professional even when debts are very overdue. Customers are still customers even when they have not paid their invoices.

Just do it! - don't let fear or complacency set in. If a customer owes you a payment, pick up the phone! If a customer is refusing to pay, start legal action! If there are invoices to raise, get them raised! If a credit limit is not yet agreed, get it agreed!

Now watch this video...

Thank you so much for taking this course. I wish you all the best in your credit controlling!

The Bookkeeping Master