The 3 most important things to keep your business afloat

July 1, 2010 by  
Filed under Credit Control

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People will tell you that marketing is the most important skill or tool you should have; others will say customer service; and yet others will say pitch perfect salespeople, but in my view, they're wrong.
 
Of course these things are important; without marketing, customer service and sales you wouldn't have much of a business.
 
But let me tell you what are THE most important areas of your business to focus upon in order to prosper and grow

Credit Control
Debt Recovery
Credit Risk
Let's have a look in-depth:
 
Credit Control
 
Credit Control means controlling the money you give 'on credit'. If you deliver goods and allow your customers to pay later, you're extending credit. If you allow clients to pay 50% up front and 50% 30 days after you've provided a service, you're extending credit. If you allow customers to pay a monthly invoice by cheque or bank transfer rather than standing order or direct debit, you're usually extending credit.
 
Which is fine – if you can keep on top of it. If you know who is paying when and ensure that they do. But it only takes a couple of bigger clients to pay late, or a BACS payment to be missed without you noticing, and your business could start to slide. Before long you're spending more time chasing money and payments than new customers and it could be the beginning of the end.
 
Debt Control
 
The flip side of credit control is debt control. While I understand that sometimes bills are paid late, and sometimes there are valid reasons, I speak to clients day in day out who have been owed thousands for months, when a good bit of debt control in the beginning would have kept on top of it.
 
Imagine someone pays you £100 a month for a service and one month the payment is late. You have two choices; chase the debt immediately in a friendly manner and encourage the client to pay while the amount owed is quite small. Or allow it to build up into 10 months of owed monies, chase for £1000, scare the customer to death and never see them (and maybe not your money) again.
 
Keeping on top of what people owe you means that you can nip any problems in the bud – not to mention that in some cases it can mean you getting paid rather than finding out 6 months later that the company owing money went out of business owing millions!
 
Credit Risk
 
Wouldn't it be great if every order form you received had one of two stamps on it?
 
“He's loaded and pays his bills on time – go for it”
 
or
 
“He's skint, bluffing and lives in his car – don't touch him with a barge pole”
 
If every time you take an order and extend any type of credit you have no idea of how credit worthy these customers are, you're taking a risk. And you're gambling with YOUR money, let's not forget, not theirs!
 
Make a point of doing credit checks on the people you extend credit to – it shows them that you're serious and flags up any potential problems early on.
 
So what's a business to do?
 
Larger companies may be able to hire people for debt and credit control, and buy credit checks on every customer that comes through the door.
 
For everyone else, I'd recommend the following 3 pieces of software:
 

 
 
  • Credit Guardian - Check your prospects and customers out for Credit Risk; FREE software and annual subscription based on the number of companies and linked with Experian
  • Credit Hound - Chase your debtors with Self-Chasing Credit Control software and make sure that you get your money back
  • Debt Recovery – Harley Grove are pleased to have partnered with TAK-Outsourcing.com to provide this service for when nothing seems to work when trying to get your money from your debtors.
Don't let bad credit risk, bad credit control and bad debt recovery bring your business to its knees.
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5 Reasons To Stay On Top Of Credit Control

June 8, 2010 by  
Filed under Cashflow, Credit Control, Software

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There's an often used saying that goes:

“A sale is not a sale until it's paid for”

Yet that's something that lots of small businesses often forget – the sale isn't really a sale until the money is in the bank.

It's very easy to look at your list of sales and think you've done well, but if your credit control isn't up to scratch, then it's all just figures on a piece of paper.

Here are X reasons why you should keep on top of your credit control.

  1. Suppliers
    If you're not collecting money from your buyers and customers on time, then the chances are you're paying your suppliers late too. This leads to bad relationships, loss of discounts and preferential treatment, and can in turn lead to suppliers refusing to deal with you. As you're finding out yourself, no-one likes to provide goods or services to a customer who doesn't pay up on time!

  2. Staff
    Obviously your staff won't be happy if it's clearly difficult to pay them every month, and even less so if they're paid late, but it's not just their salary that can be affected by lax credit control. If you're not collecting money on time, and not paying suppliers on time, then the chances are it's your staff bearing the brunt of the money chasing phone calls, and that can be really bad for morale. Reducing production and conviviality among colleagues. Unhappy staff don't do a great job!

  3. Reputation
    This works both ways – if you become known as someone with less than perfect credit control then your suppliers will take advantage of this and pay later and later – your reputation as a bit of a pushover could spread and before you know it you're spending more time chasing money than you are earning it. And of course, no-one wants to have the reputation of being a late payer, so you may find it hard to get new suppliers and preferential prices if it's widely known you can't pay on time.

  4. Bank
    More and more these days the banks want to see a steady flow of money coming into a business account. If all of your chasing is done when your business bank account is into the overdraft, it's quite clear to your business bank manager that your credit control policies leave a lot to be desired. Also, if you want to apply for a loan or an overdraft / extension in the future, the bank will look at how your account has been run – if your credit control makes your business look unprofitable you're unlikely to get that loan.

  5. Continuity
    Whether you're a one man band or a small team of people, having to stop and chase money or answer money chasing calls eats into your production time. If you have to stop work for a client because they haven't paid, it gets harder to pick it up again. If you have to tell a supplier to stop provision of a service or goods because you haven't paid, then when you do pay, it could be a while before they can start again. Continuity in business is important to keep the flow of a job going, don't let your bad credit control spoil it!

They say that cash is king and as we can see, good cash flow is essential to running a successful business – no cash, no business.

Giving your customers credit may be good for sales but do you have the right procedures to collect the cash?

Credit Hound® is designed to automate and streamline the processes involved in good credit management. Greater automation of your chasing procedures improves productivity and brings savings to key areas in your business.


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