Topics: Credit Control Process, Finance and Accounting Outsourcing Services

A Guide to Overcoming Challenges in Credit Control

Posted on June 10, 2024
Written By Priyanka Rout

A Guide to Overcoming Challenges in Credit Control


Effective credit control is fundamental to maintaining robust financial health and ensuring smooth operational flows. This vital process extends beyond mere debt monitoring—it is pivotal in securing timely payments and preserving steady cash flows. Although it may appear straightforward, credit control can be intricate, presenting challenges that test even the most experienced financial teams. 

The importance of robust credit management services cannot be overstated, especially for safeguarding liquidity and optimising cash inflows. This task becomes particularly arduous for SMEs that often operate without dedicated credit controllers. Effective credit controllers embody a unique set of skills—they are outgoing, assertive, organised, tenacious, and professional, qualities that surpass those of a typical bookkeeper. 

Outsourcing credit control services introduces its own set of challenges, including time constraints, stress management, and the necessity to maintain professionalism to avert potential business losses. In this blog, we delve into the common obstacles faced in credit control management services and propose strategies to streamline financial operations and facilitate business growth. 

What are the 5 Biggest Challenges of Credit Control? 

Challenge #1: Late Payments 

Late payments pose a significant challenge for many businesses when it comes to managing finances. A Federation of Small Businesses survey reveals that each year, late payments lead to the closure of 50,000 businesses and cost the UK economy approximately £2.5 billion. 

The consequences of late payments extend beyond immediate financial strain, affecting various aspects of business operations: 

  • Cash Flow Disruptions – Delays in payments can prevent a business from meeting its financial obligations, incurring costs like overdraft fees and interest. 
  • Rise in Bad Debts – Unpaid invoices are more likely to turn into bad debt over time, affecting financial health and stability. 

What Can You Do to Solve This? 

  • Monitor Your Sales Ledger: Ensure effective credit control by maintaining a vigilant watch on your sales ledger. This helps quickly identify overdue invoices and safeguards your cash flow. 
  • Update Your Cash Flow Projections: Stay proactive by regularly updating your cash flow forecasts to detect and address potential shortfalls early, ensuring you meet financial obligations smoothly. 
  • Encourage Prompt Payments: Motivate timely settlements by offering early payment discounts. This may reduce profit margins but accelerates cash inflow and can be a sustainable addition to your pricing strategy. 
  • Flexible Payment: Offer installment options for customers struggling to pay in full, helping them manage cash flow and meet commitments. 

Challenge #2: Deteriorating Customer Relationships 

Ending a business relationship over late or missed payments can harm repeat business, lead to bad reviews, and damage your brand. While fallouts may be unavoidable, they shouldn’t result from payment issues—you deserve to be paid for your work! 

Communication problems often stem from poor invoicing and payment collection practices. Prompt, solid, and professional methods are crucial for every business. 

What Can You Do to Solve This? 

Clear and purposeful communication is vital in credit control management. It requires a careful approach to be both assertive and professional. Companies need to ensure they follow up on overdue payments while preserving positive customer relations and protecting their reputation. 

Effective tactics for this include: 

  • Establishing Clear Payment Terms: Define payment terms, due dates, accepted methods, and late penalties to prevent misunderstandings. 
  • Implementing Scheduled Reminders: Use automated systems for reminders and follow-ups, ensuring timely payments without overwhelming customers. 
  • Crafting Personalised Messages: Enhance customer relationships by tailoring messages with the customer’s name and past positive interactions. 
  • Diversifying Communication Methods: Use phone calls and text messages for urgent reminders, showing commitment to resolving payments and eliciting faster responses. 

Challenge #3: Lack of Technological Implementation 

The lack of technology in credit control management services can significantly impact a business’s financial health and efficiency. Key areas affected include: 

  1. Data Management
  2. Risk Assessment
  3. Scalability
  4. Compliance and Security

What Can You Do to Solve This? 

Shifting to modern, digitally driven methods of credit control can alleviate common challenges and enhance both efficiency and accuracy. Here are some important features to consider when selecting credit control software or solutions: 

  • Real-time Visibility: Cloud solutions provide instant updates on accounts and debts, enabling quicker, informed decisions. 
  • Seamless Integration: A well-integrated ERP or credit control management tool centralises platforms, streamlines workflows, and reduces data handling errors. 
  • Data Analytics: Advanced software analyses customer payment behaviours, helping predict and prevent delays. 
  • Centralised Platform: A unified platform manages payment data, debts, and communication logs, keeping the business organised. 
  • Payment Portals: Secure online portals expedite payments and reduce late payment instances. 

Challenge #4: Ineffective Risk Evaluation 

Credit control often fails in risk evaluation, causing financial instability and high-risk exposure. It relies on outdated data, limited sources, static credit limits, manual processes, lack of customisation, and inadequate stress testing. 

Key shortcomings include: 

  1. Over-reliance on historical data 
  2. Limited data sources 
  3. Static credit limits 
  4. Manual processes 
  5. Lack of customisation 
  6. Inadequate stress testing 

What Can You Do to Solve This? 

Effective credit control management is crucial for minimising risks and avoiding delayed payments. Companies can adopt proactive strategies to identify potential challenges early and resolve them before they escalate. 

Here are some practical methods to predict and prevent late payments: 

  • Credit Checks: Conduct credit evaluations for new clients and maintain ongoing assessments to ensure payment reliability. 
  • Setting Credit Limits: Establish customer-specific credit limits based on credit checks to control risk. 
  • Monitoring Payment Trends: Analyse customer payment habits to identify potential delays and address issues early. 
  • Adjusting Credit Terms: Tighten credit terms for high-risk customers based on their credit history and payment patterns. 

Challenge #5: Lack of Staff Competency 

Inadequate staff competency in credit control management can jeopardise a company’s financial stability. This deficiency affects the ability to assess client creditworthiness accurately, leading to increased credit risks and potential bad debts. Competency gaps may also impair client relations and prompt compliance and reporting errors, which could result in regulatory penalties and misinformed decision-making. 

What Can You Do to Solve This? 

Enhancing the capabilities of your accounts receivable (AR) team through dedicated training and development is vital. Such investment not only improves their efficiency and effectiveness but also equips them to tackle complex situations with confidence. 

Key training areas for AR staff include: 

  • Financial software proficiency: AR staff must understand their credit control software to fully leverage its functionalities and streamline operations. 
  • Time management: Despite automation tools, AR personnel need effective time management training to prioritise workloads and handle multiple accounts without compromising quality. 
  • Staying informed: Staying informed through regular training and negotiation workshops enables the AR team to adopt new tools and strategies, enhancing their effectiveness.  


Partnering with an outsourced credit control service provider who understands the importance of the process and can add value to it is crucial for improving efficiency. 

QX is a top finance and accounting outsourcing provider in the UK, offering outsourced credit control services that ensure clients receive payments promptly. This is achieved through a strong and sustainable credit control system. Clients benefit from excellent processes based on best practices and the expertise of skilled credit control professionals. 

Contact QX to find out how you can stop worrying about credit control issues. 

RELATED BLOG: Click here to learn how you can integrate credit control outsourcing with existing systems. 


What are the methods of credit control?

Credit control involves several methods to manage and oversee the extension of credit. These methods include:

  1. Conducting credit checks.
  2. Setting credit limits for customers.
  3. Regularly monitoring accounts.
  4. Implementing debt collection procedures.
  5. Offering discounts for early payments.

Benefits of credit control include better cash flow, less bad debt, and stronger financial stability. However, it might also lead to fewer sales and higher costs.

What is the purpose of credit control in a business?

The goal is to shorten the time between delivering a product or service and receiving payment. This involves extending credit to customers in a careful and controlled manner. Effective credit control balances maintaining customer relationships while ensuring timely payments. 

Should my business be a specific size to outsource the credit function?

Outsourcing credit control isn’t just about business size; it’s about workload, expertise, and cost-effectiveness. Smaller businesses benefit from accessing specialised skills without hiring full-time staff. Larger ones find it useful for managing high volumes or complex credit arrangements. Ultimately, the decision depends on your needs, resources, and priorities, weighing factors like transaction volume, complexity, and cost-effectiveness. 

Originally published Jun 10, 2024 09:06:55, updated Jun 10 2024

Topics: Credit Control Process, Finance and Accounting Outsourcing Services

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