Without a solid credit control policy, any business will suffer in both the short and the long term. The policy forms a foundation for all debt recovery procedures that you implement.
A good credit control policy will provide continuity and best practice throughout all financial aspects of your business. At Commercial Domestic Investigations, we understand how overdue accounts can impact your business and without a credit control policy this debt is unlikely to be recovered. We wanted to share some of our knowledge and give some advice on creating a great credit control policy.
What is a credit control policy?
A credit control policy is essentially a set of rules that staff should adhere to when trading on credit terms. Credit policies are designed specifically with your business in mind so will be based on best practices and past experiences. For this reason credit control policies vary from business to business, some range from a few paragraphs to a few pages. Some only speak to credit control departments while others address all departments in the business. There is no right or wrong answer to this, your credit control policy only needs to suit your business.
Why do you need one?
A credit control policy gives your business consistency when approaching debt recovery. It means that your credit control team can offer the most appropriate credit terms to each customer. Outlining a collections procedure means that your team understands what they should be doing at every stage of the process allowing them to work quickly and more effectively. It can be a valuable document when it comes to the recruitment and training of new employees.
What should be included?
When creating a good credit control policy, you should consider the following points:
Roles and responsibilities – Clearly define the roles and responsibilities of all employees involved in the accounts department and credit management team. State any authorisation and decision makers to eliminate any confusion.
Communication and procedures – Outline the communication channels that are expected between your business and your customers throughout the credit cycle. Compile a list of “do’s and don’ts” to minimise errors by your credit team.
Terms and conditions – Include your terms and conditions on all sales documents so the customer can be under no illusions about the way you operate, always get the customer to agree to these terms and conditions with a signature.
Business goals – Keep in mind your business goals, and the cash flow requirements to achieve these goals. This will help you when making decisions about things like the length of credit terms to offer your customers.
Invoicing – Ensure all invoices follow the same template and include all necessary information for a customer to provide you with payment. Invoice your customer within 244 hours of them completing an order (unless otherwise agreed). This means that they have less time to make excuses for late payments.
Collections – Unfortunately, no matter how rigid your procedures are and how well your business sticks to them, there will always be a select few customers that do not pay on time. A credit control policy means that your employees have a relatively stress-free way to collect a debt. The process should begin before the invoice is due, leading to phone calls, letters and resulting in a third party collection agency operating on your behalf and then even legal action.
Evaluation – You should regularly evaluate your credit control policy to ensure that it is still relevant for your business. You should make sure that your processes are proving effective in preventing late payment and if they are not then you should re-evaluate these procedures or consider outsourcing your debt recovery to ease pressure on your team.
At Commercial Domestic Investigations, our team take the time to understand your business and your goals. Highly-trained to comply with industry best practice our team work with the highest levels of professionalism to recover any debt that is owed to you. If you want to discuss your credit control with a member of our team, contact us on 08444 159200 or email firstname.lastname@example.org.