credit control

A Small Business Guide to Credit Control

A Small Business Guide to Credit Control

As a small company with limited resources, a late-paying customer can represent a cashflow nightmare. You need to have stringent controls in place if you plan to extend credit to customers; if you have a lax credit policy, it could spell the end of your business as unpaid invoices reduce your ready cash to zero. This article explains how to develop a proper credit control policy for your business. We cover how to check a customer’s credit and how to decide how much to lend them, then move on to everyday systems for credit control. You will also learn how to chase up debtors and late payers successfully, and how to deal with the often tricky scenarios posed by dealing with larger companies. How do I check a customer’s credit? Before extending credit to a new customer, it is important to che... »

Managing Cashflow in Your Small Business

Managing Cashflow in Your Small Business

It is no exaggeration to say that cashflow is the lifeblood of your business. You can be as profitable as you like, but without ready cash in the bank to fulfil your obligations, your business could run into serious trouble. In this article, we cover the basics of cashflow management for businesses. You will learn about the main elements which affect cashflow, and how to use them to draw up a cashflow forecast, which you can use to deal with problems before they occur. Finally, we look at how you can use credit control, cost control and sales to improve cashflow, and the various external finance options available to boost your financial health. What makes up my business’ cashflow? Essentially, your cashflow refers to your actual cash balance at any one time. When looking at cashflow, you a... »

Managing your Cashflow

Government struggle with ten-day pledge

The Government’s recent pledge to pay small firms within ten days rather than the usual 30 will be an ‘uphill struggle’, according to credit control experts. The move was announced by the Government last month in an attempt to ease cashflow problems faced by small businesses in the current financial crisis, and was supposed to take immediate effect within central government departments. But a poll of 238 businesses carried out by commercial credit agency Graydon UK has revealed that just 34% consider the government to be a prompt payer, and 66% described current payment practices as slow or average, with payment taking over 30 days. According to Graydon UK managing director Martin Williams, the Government will struggle to fulfil its pledge. “While Gordon Brown&rsquo... »

Credit Checks Critical in Current Climate

Knowing who you are dealing with is the key to survival in the current turbulent economic climate, suggests Clive Lewis, Head of SME issues at the Institute of Chartered Accountants in England and Wales (ICAEW). He urges small businesses to invest in new credit checks on their customers to ensure they are aware of any potentially ‘bad apples’. “Nobody can hide from the difficult credit situation any longer. Critical to coping with it is rigorous credit control – and that means having up-to-date credit references.” says Clive Lewis. “Whilst many small businesses are diligent in carrying out credit checks on new clients, the information obtained is only of any use if it is up-to-date. In the current credit crunch climate, customers’ creditworthiness ... »

Don’t let late payments destroy your business

Small and medium sized businesses continue to be hard hit by the credit crunch, with late payment resulting in debt recovery problems, warns the Association of Chartered Certified Accountants(ACCA) Glenn Collins, head of advisory services, ACCA UK says: “Good credit control is essential at all times, but particularly at the moment when, for so many businesses, every penny counts. If you are having difficulty in recovering costs then seek assistance from a chartered certified accountant who can make you aware of your options.” When controls such as credit checks, sticking to credit limits and monitoring activity of debtors fail, debt recovery will be the only option. The following are ACCA’s top ten tips in securing debt recovery: Decide whether it is worth a fight. There ... »

Credit Control System: Setting up

Mismanagement of cash flow is the single biggest reason that small businesses go under. Therefore, a good credit control system is an essential part of any business’ accounting procedures. Maintaining consistent cash flow, avoiding bad debt and minimising late payments are essential for survival. Use the following checklist to set up a credit control system. Things to do 1. Set up a detailed credit control system It must allow you to identify invoices that have been raised, sent to customers or paid. You must also be able to see which invoices need chasing up. Each customer must have a file with details such as: business name; business address; postal address for invoices; and a contact name and number for invoice enquiries. Train several people on your new credit control system and ... »