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Top tips for managing your credit control effectively

Managing credit control and debt recovery processes is an essential part of any business, and never more so than in challenging economic times, where the risk of delayed payment, or non payment, is heightened.

Veale Wasbrough's top tips to making your credit control and debt recovery processes as effective as possible are outlined below:

1. Obtain as much information as possible from your customers/clients from the start.
The ability to identify, locate and contact debtors is essential to effective debt recovery. As a result it is very important that your sales team or other representatives obtain accurate details from your customers at the outset and you ensure that these records are regularly maintained. Any change in your client's trading name and/or address should be investigated. Do not simply agree to what you are told by the customer.

2. Keep in regular contact.
It is important to maintain regular contact with customers and clients, as this will enable you to monitor their current financial status and be alerted to any problems in their trading position. This may also assist you in determining whether the debt is worth pursuing, as you will be better placed to assess whether a debtor company cannot pay or does not want to pay.

3. Have processes designed to spot likely problems.
You will know your customersâ€™ payment behaviour best. You need to be able to spot if they begin to take longer to pay or default on agreements or give you cheques which bounce.

4. Employ a credit assessment company.
Membership of a reputable credit assessment company could enable you to risk assess all potential customers before you commence trading. Credit assessment reports immediately highlight risky companies with numerous CCJs and a dubious trading history. However, you should note that the information provided by these companies can be partial and historic.

5. Review your Terms and Conditions.
Ensure that your terms and conditions are up to date and are applicable to your contracts with your current suppliers and customers. For example, do your Terms and Conditions contain suitable retention of title provisions or specific clauses in relation to late payment and debt recovery that stipulate the rate of interest payable and your ability to recover your legal costs?

6. Personal guarantees.
If you are giving credit to a customer, or trading with a limited company for the first time, then personal guarantees from directors should be considered. They will be giving them to others such as their bank - why not you? Ultimately this is a commercial decision.
If the debtor company should fail to pay/go insolvent you will then be in a position to pursue the stated individuals personally for the monies owed. Before the guarantee is signed, a residential address (or another substantial asset) should be recorded and ownership confirmed.

7. Ensure that your credit control procedure is clear and consistent.
Your credit control procedure should always be consistent and should commence as soon as an invoice is outstanding. You should always perform any action that you have threatened, as failure to do so will undermine your credibility with your clients and may lead to subsequent correspondence being disregarded by other debtors. We usually find clients send out too many letters before the real action starts. Remember that if debtors have any money, they will pay the creditor who chases first and most relentlessly.