Credit Control

how to control credit

What does credit controlling involve?

Everyone has heard the saying ‘Cash is King’ and with 50,000 of small businesses failing each year due to cashflow issues business owners want a credit control solution that can ensure debts are paid on time.

Late payment from customers cause numerous problems, these include awkward conversations with customers. In most small businesses it will be the same person that closed the deal who is chasing the debt. Which even though it shouldn’t can have a negative impact on the business relationship.

Dealing with overdue invoices takes time out of your business, physically to chase the amounts as well as pulling your focus away from growing your business.

With the average daily debt being £25,000 late payments can also be the cause of stress and sleepless nights, which again can eat into time that you should be spending away from the business with your family.

It can be a really frustrating situation as more often than not there is no real reason why customers consistently pay late.

Nobody should have to consistently suffer from late payments, so here are some tools and techniques that can help you keep on top of your outstanding invoices:

Keep your accounts up to date

Keeping on top of your accounts is key to getting on top of your outstanding invoices, using cloud software like Xero you can instantly see what money is due in and if the large invoice you have been chasing has been paid. Xero has an app on your phone so information is available where ever you are. If you are out at a customer you can instantaneously see if they have settled their most recent invoice.

Consistent process

Having a consistent process that chases outstanding invoices, issues reminders by certain days overdue, issues letters before action does result in invoices being paid earlier. A lot of this can be automated (see point 4 below). Block a slot in your diary each week to get your accounts up to date and review the outstanding invoices, if you are chasing sporadically customers will wait until they are chased to make payment and will prioritise those that consistently chase on a regular basis.

Risk Profile your customers

When making buying decision we are influenced by reviews and ratings, when choosing which book to read on my kindle anything less than 4 stars I won’t read, when booking a holiday I use trip advisor for the hotel and tourist attraction, all these tools help me to have a better experience. So when giving businesses a line of credit the same should apply we should risk profile our customers, apps such as Satago integrate with Xero and can give a free basic risk profile report. If a customer is high risk you can then put systems and processes in place such as a payment on account with supporting evidence as to why you are doing this. We have all had our fingers burnt with bad debts before and this is a way of minimising your risk.

Automated Payments

Automated Payments such as Go Cardless or Stripe are the utopia of any small business. If a customer is making regular payments these solutions shift the payment of invoices from the Customer to a direct debit solution. Repeating invoices can be set up from Xero and when they are sent out Go Cardless pulls the money via direct debit from the customer, the invoice is marked as paid in the accounts and transferred into your business account. Whilst there is an added cost to these solutions it is far outweighed by the time they save.These solutions don’t necessarily have to be used for invoices that are on a monthly cycle they can be used for project work that is paid in installments. For example Web designers may take an initial deposit, a payment on initial design and a payment on approval. With an automated payment service there is no chasing those final amounts.

Automated Chasing

Xero has automatic chasing built in where e-mails can be sent automatically once and invoice is overdue. This can then be taken one step further using an app such as Chaser which integrates with Xero, reminders can be sent before an invoice is due, sequences can be set up to chase the outstanding debts it also even sends a thank you note to customers when they pay. The other advantage to these automated chasing process is it enables you to play the traditional good cop (Sales department) bad cop (credit controller) scenario, so the conversation starter is positive.


The whole process including your book keeping can be outsourced, we can provide this solution giving assurance that debts are chased regularly, systems are put into place, customers are risk assessed, and we can quite happily act as the bad cop.

All these techniques will help reduce the outstanding book debt, the stress associated with cash flow issues and free up your time to concentrate on keeping the momentum going in other aspects of the business, which often is a lot more interesting.

Failure to have systems and procedures in place for credit control can lead to overdue invoices, debts running out of control and increased bad debts. We have one client who has been on top of credit control since day 1 and in over 10 years of trading they have had one bad debt.

We can help in a number of ways from reviewing your existing system and making recommendations, setting up automated reminders to full outsourcing.

Getting credit control right can take a lot of input at the start, but once systems and processes are up and running it can help reduce the amount of sleepless nights that you are incurring worrying about the cashflow problems within your business.

Please get in touch and contact us today if you need any further information.

Carrie Stokes Chartered Accountant

Carrie Stokes Chartered Accountant

I work with directors of limited companies in Shropshire, Staffordshire and the West Midlands giving them a clear and up to date financial picture of their business that they understand. Looking at the numbers, what they mean and how they can be improved to grow their business.

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