The Importance of Credit Control

Posted: 14th October 2015

Recent research shows that British SMEs are owed £67.4bn in unpaid invoices, up 8% from £62.5bn in the last year. As the extent of overdue payments and extended payment terms grow, on average SMEs are now waiting 72 days for invoice payments which is up from 61 days at the height of the recession in 2009.*

Credit control is an integral part of running a successful business. With cash flow issues and bad debt cited as the main reasons most small businesses fail it’s important that credit control processes and procedures are taken seriously. As a business increases its customer base, managing customer payments inevitably becomes more time-consuming and complex.

Whether you decide to outsource credit control or run your own credit control in house, every business must have proper credit control procedures. Whoever is in charge of credit control should know when invoices are sent and when payment is due on each of them. Equally important is that a diary system is put in place to determine when chasing letters are to be sent and when calls are made to chase customers.

Many business owners find that collecting debts from their customers is an awkward conversation to have as they don’t wish to ask for payment for fear of upsetting the relationship.  However, the longer an invoice remains unpaid the more difficult is becomes to collect, and the more at risk you are of being caught with a bad debt (find out more about Bad Debt Protection here). Outsourced Credit Control could be the solution.

Outsourcing credit control is often much more cost effective than employing and training staff and if the business owner feels they can do the credit control themselves, outsourcing can free up valuable time.

Outsourced solutions

Credit control can be outsourced under an Invoice Finance arrangement.  An Invoice Finance company will advance you an agreed percentage of the value of your outstanding customer invoices. This immediately addresses any cashflow issues associated with waiting for payment. The Invoice Finance Company can also support you with the collection of the unpaid invoices and will use their expert teams to carry out your credit control and adhere to the correct procedures. The alternative to this arrangement is invoice discounting, whereby money is advanced on customer invoices but the credit control function stays in-house and is the responsibility of the business owner. 

At Macla we provide a comprehensive credit management service geared to our clients' individual requirements: 

Features of outsourced credit control services

  • Allocated an expert and experienced credit controller
  • Your dedicated credit controller builds rapport with your customers
  • A consistent credit control process
  • Bespoke solutions structured to your requirements
  • Credit checking – carried out ongoing on your behalf

Benefits of outsourced credit control services

  • Improved cash flow
  • Reduced risk of bad debts
  • Avoids the costs associated with recruiting, training, managing and retaining employees

We are pleased to say that currently our average DSO (Days Sales Outstanding) across all of our clients is just 39 days.  Compare that to the UK average and you can see how a professional and systemised credit control function can improve the speed of customer payments. 

If you are interested in learning more about how we can help with credit control, please contact us here and one of our friendly team will be happy to help.

*Research by the Asset Based Finance Association (ABFA), the body representing the asset based finance industry in the UK and the Republic of Ireland. You can view the full article in Business Money magazine by clicking here.