Effective credit control is the cornerstone of successful business. The COVID-19 pandemic has resulted in all businesses experiencing unexpected and sharp economic shock and uncertainty as to when the current situation will end.
A flexible and efficient credit control process will be the key to business survival in the weeks and months ahead.
The following are some practical tips to maximise your cashflow in this difficult period:
- Bills, Bills, Bills – while it may seem much longer, business life was largely on a normal footing only 3 weeks ago. Therefore, it is likely your business has done work for which you can invoice now. You need to prioritise issuing of invoices – remember bills only get paid when they are sent to clients. Similarly, any current outstanding invoices should be chased as soon as they become due.
- Alternatives – you know your clients best. Consider what alternative payment arrangements you can offer them by way of instalment arrangements or extended payment terms. This is a time where a previous good payment history should pay dividends. If you provide an instalment arrangement, agree it in writing and closely monitor payments.
- Keep in touch – contact all your clients if you have not done so already. You need to know what impact COVID-19 is having on their business but more importantly, you need to be aware of any changes to their own credit control – for example, is there someone other than your usual credit control contact that you should be in communication with? How best can you reach them?
- Have a back-up – if you have a credit control team, assume that it will be depleted due to illness or care commitments. Prioritise putting in place alternative staff members to take their place if necessary.
- Inform yourself – what supports are available from your bank or other sources. While you might not need them now, you may have to utilise them at short notice in the future.
- Resolve any complaints quickly – all complaints should be well documented in case of a possible legal proceedings later on.
- Take stock – it is a good time to look at how you have been dealing with credit control up to now make changes if necessary. Ask yourself:
- Do I use a credit application form? If you don’t, now is the time to put one in place for future business. For new clients, trade / bank references and a credit check are a must.
- When was the last time I ran a credit check on existing clients? Even in times of normal trading, clients financial circumstances can change quickly, and periodic credit checks can help you avoid a costly mistake.
- Are your terms and conditions up to date? Invest in putting proper terms and conditions in place. Having proper paperwork pays for itself in the long run and will save you money.
- Are your clients aware of your terms and conditions of business and have they agreed to them?
8. Be flexible – given the fast-moving nature of this crisis, react to changes and don’t be afraid to adapt your approach to credit control if the need arises.