Myths of Credit Control

We’re thrilled to introduce local credit control and debt recovery expert Dominique Sherhod, of Practitioners Orbit. Dominique is keen to bust some common myths about credit control, as outsourcing credit control is a fairly new concept which many business owners do not consider, but perhaps should.  Over to Dominique to set us straight on the business of chasing those payments!

Clients will pay when they want 

This is often the misconstrued belief of businesses which are lacking effective credit control procedures.  The idea that once an invoice is issued, it is simply a case of waiting for the client to decide to pay it, is far from accurate.  If clients are prompted to pay with regular reminders, the invoice will remain on their radar and they are far more likely to settle it.

Unpaid invoices will be lost forever  

An overdue invoice does not mean that payment will never be forthcoming.  If telephone calls and reminder letters do not result in payment, a letter before action generates prompt payment in the majority of cases.  If payment remains outstanding, there are yet further options:

  • Instructing a specialist debt recovery agency.
  • Commencing legal proceedings.
  • Selling the debt to an invoice finance firm (although this usually means you sell the debt for significantly less than you are actually owed).

In many cases, outsourcing the debt recovery in itself demonstrates an intention to escalate the matter.

Credit control comes into play once the payment is late 

This is absolutely not the case.  Ensuring your business imposes stringent terms and conditions at the time of agreeing the provision of services or goods, is the first step in the process.  Early and effective credit control highlights any issues with the invoice, which can usually be resolved quickly and amicably.  Having clear and open communication with a client before the due date of payment is also far more likely to lead to prompt and full payment.  The longer it is left to chase payment, the harder it can be to recover.

It is cheaper to write off a debt than invest in credit control  

Writing off debts is a false economy and can end up being extremely costly whilst also having a greatly negative impact upon the business’ cash flow.  Credit control is an essential part of running a business and when it is carried out by specialists, the cost is very reasonable.  The outlay related to credit control is far outweighed by its financial benefits.

Debtors won’t pay if you chase them

The contrary is true, as debtors who have not paid an invoice by the required date are much less likely to pay if they are not chased.  Once the client is made aware of the implications of not paying, i.e. the possibility of legal action, fees and interest being added to their debt, they usually acknowledge that settling the invoice is the best option.  Instructing an agency to undertake these communications on your business’ behalf ensures that they are carried out with good effect.

Chasing payment will alienate and lose us clients

Requesting payment for a service or product which you have provided, should never cost a business its clients.  It is your right to receive payment for services undertaken and any worthwhile business relationship should not be jeopardised as a result of good credit control. It is also imperative that a good rapport is established with the client to achieve outcomes which are favourable to both parties.  Credit controllers need to be good listeners, empathetic, assertive and excellent negotiators to ensure that invoices are paid, whilst also maintaining good relationships.  Outsourced credit controllers should become an extension of your team and mirror your business’ ethos and image.

Outsourcing credit control is more costly than dealing in house

Whilst there is a cost attached to outsourcing credit control, this could be significantly less than the overheads related to an employed credit controller.  Through outsourcing, you will have access to professional credit control without the cost and risk of recruiting, training and maintaining members of staff, in addition to the payroll and other financial obligations attached to an employed credit controller.  You will take advantage of the economies of scale generated by outsourcing, and achieve the flexibility to use your precious staff budget on value adding services that are core to your business.

If you are a business owner who would like to adopt a time and cost effective means of credit control, whilst also freeing you and your staff up to focus on your core business, we look forward to hearing from you.  Please get in touch with us at Practitioners Orbit on info@practitionersorbit.co.uk or 01892 549 324 for a no obligation chat.

Practitioners Orbit_Facebook Profile

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Blog at WordPress.com.

Up ↑

%d bloggers like this: