Credit control is a business-critical accounting activity that determines the strength of your cash flow and the company’s ability to grow by making sustained investments in people, processes, and technology. A healthy cash flow drives business growth, and a company suffering from a negative or irregular cash flow will struggle to grow.
Credit control enables companies to gauge their customer’s creditworthiness and extend lines of credit for products/services bought commensurate with their levels of creditworthiness. With the World Bank forecasting global economic growth at 2.4%, the worst since the pandemic, it becomes even more critical for companies to protect and grow their cash flows.
While credit control management is essential for companies, optimising its various aspects is challenging.
What are the two difficulties of credit control?
There are plenty of complexities in the credit control process, but if we are to identify two critical challenges, they are:
- Lack of Expertise
There is a problem in the world of finance, and that problem is a talent shortage. 90% of employers say there is a skills shortage, and this shortage covers the length and breadth of finance and accounting functions. Internal accounting teams are spread thin, and an accountant managing credit control can also be tasked with accounts receivable or billing. Often, credit control is not addressed as a key focus area, and that is when problems occur.
- A Cohesive Communication Strategy
Even if specific processes are set, there is a lack of collaboration between different teams in charge of particular activities. For example, while your company will work with some of the most reputed credit control bureaus, it is essential not to entirely depend on their ratings to extend lines of credit. It is also crucial to talk directly to the customer and get more information about the financial stability of their business.
To address these and many other challenges of credit control, businesses choose to leverage outsourced credit control services to make this function central in their efforts to improve their cash flow.
However, this arrangement or working model can only be effective if it is held together by seamless communication. Let’s look at how your company can foster meaningful communication with outsourced credit control services in the UK.
The Contours of Outcomes-Focussed Communication
When working with a third-party services provider to manage your credit control needs, you must be able to engage them in a way that benefits your company. This involves a regular dialogue between you and the provider on the terms of engagement and whether the SLAs are being met. It is important to note that some of the world’s biggest crises’ have been solved through communication, so there is no reason why you cannot make the most of outsourced credit control services by fostering effective communication:
- Identifying a Communications Roadmap
What are your communication needs and preferences? This is a question you must answer. This could be something as basic as the provider being able to respond in the client’s time zone, or if the client has offices in distributed locations across time zones, the need for the provider to adhere to a follow-the-sun communication model.
This is important from the company’s perspective and the company’s customers, who might be spread across the globe. You will want your credit control service provider to be able to interact with your customers in their time zones. Another aspect of communication is language. This is an essential requirement, as you will want your credit controller to communicate in the language of your choice, and those of your customers.
The roadmap goes beyond just time zones and language to identify the contact persons, methods of communication, timelines, and more.
- Optimising Virtual Communication
While in-person communication can happen with the onshore manager or a points person, most of the interaction that will take place between your internal team and the outsourced credit control department will happen virtually. The interaction between the outsourced credit controller and your customers will also happen virtually, more often than not. It is imperative to set the rules of virtual engagement, including body language, expressing respect, establishing a comfort factor, conveying a message politely yet assertively, and more. The focus should be on driving trust, credibility, and a feeling of camaraderie that enables the outsourced credit control services team to function as an extended arm of your in-house finance and accounting teams. UK businesses are losing a mammoth £ 22.2 a year due to a lack of soft skill development, which includes communication. This is why it is essential to take virtual communication seriously.
- The Technology Paradigm
Communication efficiency can only be achieved by the use of the right tools. Technology can facilitate better communication, and UK companies are already harnessing the power of communication to grow their business, illustrated by the fact that the UK is one of the largest ICT markets in Europe. Choosing the right communication tools helps foster smoother and timely communication between your outsourced credit control services provider and internal teams. Investing in unified team collaboration tools, a unified communication platform, better network connectivity, or communication failsafe in case the primary means of communication are disrupted in any way is the way forward.
But there is another element to communication tools: you and the provider should be able to use the same set of tools. There should be zero bottlenecks to facilitate better interaction.
- Conflict Resolution
Misunderstanding resulting in conflicts is a part and parcel of all high-pressure environments. It is essential to address such conflicts to ensure these don’t impact credit control services. This can be handled by accommodating the interests of both parties, and more importantly, it also involves creating certain red lines that must not be crossed. These red lines can include unnecessary criticism, personal attacks, etc. Demarcated do’s and don’ts must be adhered to, and both teams should identify one person whose word is the last word on the subject.
Conflicts can also arise from client interaction with the credit-control personnel. A highly trained credit control professional avoids such disputes by adopting a non-offensive and primarily diplomatic approach to client interactions. Any conflict between an outsourced credit control service provider and the client’s customer can have consequences for the client relationship.
- Training and Development
Credit control ensures that your business gets paid promptly, that its Day Sales Outstanding (DSO) is at lower levels, and that there are few or no cash allocation shortfalls. This can only happen if you can send reminders to customers about invoices that are due or past their due date. You must also follow up on late payments and convince customers to pay on time. As a company, if you are working with outsourced credit control services in the UK, you might want to align their team with your way of reaching out to customers and managing different credit control activities. This can involve taking outsourced teams through specific training modules to help improve communication with the internal accounts team and your customers.
- Some of the training modules could be:
- Building a robust virtual team culture
- How to provide constructive feedback
- Conflict resolution in the accounting contexts
- Customer communication
- Legal Obligations
Many ethical and legal considerations creep into communication and must be considered to ensure efficacy. These could be around confidentiality agreements and data security, maintaining transparency at all times, being aware of cultural sensitivity, and working well within the purview of contractual obligations. By adhering to clearly underlined guidelines, teams can avoid conflicts and nurture a high-performance team that offers real-time communication regarding ledgers chased, customer updates, and much more.
What is the impact of credit control?
Why is effective communication between you and your credit control partner so important? The answer is to implement a focused credit control strategy founded on best practices and process excellence. The tangible benefit will be seen in a much-improved cash flow, with minimal credit risk, better vendor relationships, and all-around business growth.
With QX Finance and Accounting, you can partner with a leading provider of outsourced credit control services in the UK and benefit from a proven track record of managing credit control for businesses across diverse domains. Contact QX to know more about how we have instituted client-oriented communication processes that have delivered more credit control value.
Originally published Jan 24, 2024 06:01:35, updated Feb 15 2024
Topics:
Credit Control Process, Finance & Accounting Outsourcing
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