Why is Credit Control Important?
Extending credit to a client may be a good way to encourage business but also has the potential to harm your company by causing cashflow issues. The credit window in which the client must pay means you are less likely to know exactly when you will receive the funds. This wait time can be fatal to businesses who need to pay wages and utilities by certain deadlines.
Multiple pending payments from multiple sources can also be hard to keep track of, and increases the risk of invoices being paid late, or not at all.
Bad debt is one of the main reasons most small businesses fail. This refers to both the debt your company owes, and the debt owed to your company. Credit control tackles this at its root, easing cashflow both into and out of your business.
Having a good grasp of your credit control will help maintain consistent cashflow, especially as your business continues to grow. However, consistent chasing of unpaid invoices is time-consuming, difficult to keep track of, and may affect your relationship with the customer.
If you’re unable, or unwilling, to conduct this credit control yourself, and your business isn’t big enough to justify the cost of an in-house Credit Controller, it is worth considering outsourcing. Having an external company take on the responsibility of setting payment terms, collecting payments, and if necessary, issuing penalties can save you time and effort, allowing more energy to focus on other aspects of the company.