7 credit management techniques that will save you time

21/09/2023

Late payment is forcing credit controllers to spend more and more of their time chasing overdue invoices.

Not only is this frustrating, it can also prevent you from fulfilling other aspects of credit management effectively. This can then lead to higher average debtor days and some significant cash flow gaps.

While some credit management tactics are notoriously arduous and time-consuming, there are some habits that will ultimately help to save you time whilst improving performance.

Here are seven such credit management techniques to consider.

7 credit management techniques to save you time

1. Perform regular credit checks

Although regularly performing credit checks takes time, it’s negligible compared to how much effort could potentially be wasted chasing payment if you offer credit to those who cannot or will not pay.

A credit check will instantly provide valuable insight into the financial status of your customers. It’s not sufficient to perform this check solely at the beginning of the relationship as a customer’s financial stability could change at any point, leaving your business in a vulnerable position.

These regular checks allow you to make informed decisions about whether or not you trade with them on credit terms.

There are also various other ways to monitor how your customers are performing financially.

Here are 21 warning signs that your customer can’t afford to pay you.

2. Tighten credit terms for selective customers

Similarly, if you have doubts about a customer’s ability to pay, either through a poor credit score, gut feel or poor payment performance in the past, you might want to be a bit more stringent on the credit terms you offer.

This simple step can significantly reduce the risks to your cash flow. And, by keeping a watchful eye on these customers, you will limit the need to spend ages chasing them for payment further down the line.

You could even take this one step further and refuse to work with any poor payers altogether.

Whilst this sounds like a drastic step, you should ask yourself if a customer is worth keeping if they don’t make payment on time and ultimately cost you time and resources chasing for payment.

Would you stop supplying a poor paying customer?

3. Eradicate paper

You can significantly improve processing times by creating and distributing invoices electronically. By avoiding the need to print, post and process hard copies, invoices will get to where they need to be faster. This increases the chances of them being paid within agreed terms.

Also, automating this process will simplify and streamline your procedure to reduce the chances of late payment. For example, you can schedule invoices to be sent out to remove any delays from the process.

Likewise, ensuring customers have a choice of electronic forms of payment such as BACS or card transactions can speed up payment times and increase transparency.

Download our Essential Guide To Credit Management

4. Diarise courtesy calls

Making courtesy calls before your invoice is due is often one of the most overlooked credit management techniques.

But keeping in touch with your customers throughout the credit period can significantly improve payment terms.

Plus, if any potential problems arise, you will have sufficient time to address them before your cash flow is affected.

Whilst performing these calls will take some time out of your day, scheduling them in ensures you maintain regular contact.

This consistency can reduce the likelihood of late payment and save you lots of time chasing in the long run.

Here’s what to cover in your courtesy calls to maximise success

5. Invest in training

It’s important that the person or people responsible for credit control have the required skills to do the job effectively or you could be wasting valuable time and your cash flow could suffer as a result.

Whilst taking the time out to participate in some training might seem counterproductive, refreshing your team’s skills and learning new best practices can significantly improve their performance.

This is then likely to be reflected in reduced debtor days.

Here are 7 skills all credit controllers need and where to get them

6. Prioritise invoices

Statistically, the longer an invoice goes unpaid the harder it becomes to collect. Therefore, it seems logical to prioritise overdue debts.

Getting these paid as soon as possible will prevent you wasting your time further down the line.

That said, it is vital that you learn when your in-house efforts have been exhausted and when to seek professional help, as continuing to throw time and money at bad debts can be even more detrimental to your business.

7. Use a debt collection agency

One of the reasons it can be more detrimental is that the longer you spend chasing overdue invoices, the less time you will have to keep on top of newer invoices which are approaching their due date.

As mentioned above, it is of course logical to prioritise overdue invoices as they will likely become harder to collect the longer they go unpaid.

But, if you spend so much time chasing overdue payments that you neglect the rest of your sales ledger, it could drain your resources and exacerbate any cash flow problems you’re experiencing.

In these circumstances, a debt collection agency can be invaluable. They will use their expertise to recover debts that are proving challenging.

This will give you time to reprioritise your resource and make sure other invoices don’t follow the same path.

Discover when you should consider using a debt collection agency

Can we help?

If you still find that you don’t have enough time available to effectively manage your credit control, you could potentially benefit from outsourcing this function to the experts.

Whether you want to outsource all of your credit control or just the collection of invoices that reach a certain age, as the UK’s trusted debt collection agency we could be your ideal partner.