Whether you're running a small business or heading up a PLC finance team, good credit control is key to business success. A clear, effective credit control strategy lays out how to keep cash flow problems to a minimum, chase slow payers and minimise bad debt - ultimately allowing your business to grow.
But what if businesses don’t pay promptly? Solicitor and debt recovery expert Matthew Brady shares his top tips on recovering debt and protecting cashflow.
A study by Barclays found that last year, 58% of UK SMEs were waiting on late payments, and for medium size enterprises (50 to 249 staff), that rose to 94%*.
When a client doesn’t pay on time, resources are often diverted to chasing unpaid invoices, risking productivity.
For small businesses, more than a week each year is spent chasing money owed. According to Intuit, that translates to 56.4 million hours, worth £6.3bn to the economy**.
How to avoid losing time and money to debtors
1. Create and maintain a cashflow forecast
Creating and maintaining a cashflow forecast gives you an estimate of revenue: a rough idea of what’s coming in and if it’s enough to cover outgoings. Once created, be sure to keep the cashflow forecast up to date.
2. Make it easy for clients to pay
Sometimes clients have trouble paying, but you can minimise potential problems by making it easy to get paid by cheque, BACS, credit and debit cards, or cash.
Lay out your payment options up front and remind clients of their options if their invoice goes unpaid.
3. Create a clear credit control process
This sets out the process of monitoring and managing invoices that have been sent to customers but haven’t been paid – also known as accounts receivable.
Every team member needs to be clear on their part in the credit control process, which should include:
Credit terms.
The importance of prompt payment.
A timetable of actions, including reminders when the payment is due, when it’s overdue, and every seven days it remains overdue.
When to pass the overdue invoice to a debt recovery solution tool.
4. Make invoice recovery part of your policy
If invoice recovery is a part of your process, debtor days are reduced. It’s easier to manage client expectations from the outset and pass late payment concerns to your debt recovery solution team, saving your business time and money and circumventing difficult conversations.
Third-party legal expertise can make recovering late payments fast, efficient, and compliant. The right legal team can quickly assess outstanding invoices, make recommendations and help you apply compensation, late fees and interest to the debt (where applicable). They’ll seek recovery of your outstanding debts without the heavy-handed approach that risks damaging important client relationships.
What is Muckle Collect debt recovery?
Muckle Collect is a debt recovery solution from legal experts designed to help businesses of all shapes and sizes recover unpaid invoices.
Combining innovative technology with careful relationship management, the Muckle Collect team assesses your debts and creates a recovery strategy.
Each unpaid invoice is fully trackable through the Muckle Collect online portal; it’s not an automated service – you’ll hear from real people giving advice at every stage of the debt recovery.
It’s free to register with Muckle Collect. Sign up and start uploading the invoices you need to recover.