10 steps towards an improved credit control process

Credit control is a mission-critical brick in a business’s F&A wall. Remove this brick and the wall comes crumbling down. There is a reason for this. Credit control has a direct impact on your cash flow. If your business has a seamless and optimal credit control process in place, you won’t face a cash flow problem.

On the contrary, if your credit control function is all over the place, one of the biggest challenges your business will face is cash flow disruption. This is one of the reasons why outsourced credit control is such a good idea. But we are getting ahead of ourselves

If you want to improve your credit control process here are 10 steps you must take:

1) Audit Your Credit Control Process

Before you make changes to your process, you must know what is wrong with it. So, ask yourself this pertinent question – do you have a well-established, properly functioning credit control system in place?
The following questions will give you an answer:

Are there regular delays in invoice processing?
Are there delays in customer follow-ups?
Are you facing invoice disputes, because of erroneous information?
Are you facing cash flow turbulence at the end of the month or quarter?

If the answer to these questions is a resounding yes, then you have a credit control problem, which needs to be sorted out quickly. Working with a credit control outsourcing services company, will be a very good idea in this regard.

2) Usher in Digital Transformation

The whole of finance and accounting function is time and data intensive. You will not be doing justice to this function, if you are not taking steps towards digital transformation to automate specific tasks, improve data gathering, enhance data insights and accurately input the right data. From the credit control perspective, there are advanced, feature-rich software available that can help streamline and speed up your process. If you are not using them, you should.

But there are problems in technology adoption as well.

According to Gartner, 76% of CFOs cited lack of ROI from investments made in digital transformation due to longer implementation times. If you are worried this is going to happen to you, work with credit control companies in India, who already have cutting-edge software in place. You get access to the latest technology and save money in the bargain.

3) Invest Heavily in Customer Assessment

It isn’t only about money in this case. You might invest all the money in the world in assessing customer creditworthiness, but if you are not serious about it or you are not doing it the right way, you will get it wrong.
A primary reason why businesses have a list of risky clients on their hands, is because the client appraisal process was faulty. Proper care wasn’t taken to judge credit risk, and the financial analysis of the client, their past payment behaviour and evaluation of commercial risks, wasn’t thorough enough. Result – a risky client.

If you think your business doesn’t have the requisite resources to ensure comprehensive credit risk assessment, it is time to outsource your requirements to credit control companies.

4) Invest Time in Proper Invoicing

Invoice processing is an extremely cumbersome task. The biggest challenge is ‘data entry’, but there might also be a delay in invoice approval, especially in cases where there is complicated billing. Here again, a missing line or word might create problems in the invoice. Lack of detailing results in invoice disputes.

Another problem that rears its head in improper credit control is missing invoices. In such cases, the people in charge have either forgotten to invoice or have misplaced invoices. This can directly result from a lack of digital transformation e.g. a digital e-repository of invoiced and invoice data.

5) Plan a “Courtesy Call”

One of the easier ways of improving the credit control process and ensuring you are paid on time, is calling the customer a week or 15 days prior to the payment date. This will ensure you know the customer has received the invoice and has gone through it and there are no problems with it. In case there is a problem, you have sufficient time to correct the information and resend the invoice. What’s more, with this call, you have reminded the customer that payment is due on a particular date.

6) Large Debts Should be Core Focus Area

In an ideal scenario, you must be able to ensure on-time payments for all invoices whatever the amount. But, over a period of time, your firm might have a collection of unpaid invoices, wherein there are some customers with a large amount owed to you. Focus on these. Yes, focus on all invoices, but give special attention to the larger payments due.

But, it’s not only about unpaid invoices; if you know there is a large invoice that is due for the month or quarter start the follow up process in good time. Don’t leave it till the end. If you make a sustained effort to ensure the larger accounts receivables are paid on time, your cash flow will be on point all the time.

7) A Follow Up Process

If a customer has not paid an invoice on time, a follow up call is in order; you need to set a regular time frame for these calls, till the customer has paid up in full. It is imperative that you have a team of callers whose core focus is calling customers to remind them of an approaching invoice due date and calling them when they have fallen behind on their payment.

It requires special skillsets and training to call people wherein your team pushes customers ever so politely to make their payments. Regular follow-ups are bound to irritate the customer, but it is imperative your team is able to handle irate customers and still politely convince them to make payments.

This is an integral part of improving your credit control process and if you do not want to make such investments in manpower and tech, why not work with an outsourced credit control services provider.

8) Hire Professionals with the Right Skillsets

Build a stable team of professionals who have the required experience and expertise to take care of your credit control needs. All the seven preceding steps are held together by the expertise of your credit control professionals.

You must hire people who have a successful track-record of not only handling credit control functions but also effectively addressing associated challenges. And this team must be stable, meaning this team mustn’t suffer from high attrition rates; it is difficult to find highly-trained personnel who know the inside and out of credit control. Also, you must be able to scale your team to meet the growing needs of your business.

9) Work with a Reputed Credit Control Outsourcing Services Company

The easiest way to improve your business’s credit control process is to outsource all your credit control activities to an outsourcing company specialising in credit control services. Work with a company that has a history of improving the credit control department of its clients, which is illustrated by improved process efficiency, cost reduction, and high ROI.

With credit control outsourcing, you also get the advantage of bleeding-edge technology coupled with comprehensive expertise of the professionals working on your project. You don’t have to worry about scalability, whether scaling operations up or down.

10) Keep Monitoring Efficiency

This is the final step. Even if you have implemented all the steps given above, you must still ensure that everything is functioning smoothly and you are getting the dividends along expected lines. There is always room for improvement, whether it is invoicing, follow up, collection or reporting. So, invest in improving your credit control process all the time.