The 7 steps to successful Credit Control

For the financial health of your business and your cashflow it is important to have a robust Credit Control policy and procedures. At Credebt we are experts in this field, and we are happy to share with you the 7 steps you can take to make sure you have your Credit fully under Control at all times.

Step 1: Assess risk and control who you give credit to

The first stage to Successful Credit Control is Credit Assessment. You must know who your potential Customers are and ascertain their ability to pay you before you start trading with them. Don’t rely on the Salesman/Manager/Director saying they are OK.

Obtain a Comprehensive Financial Report containing the Company’s Profit and Loss, Balance sheet and key ratios to check their ability to pay. Provide a limit based on a combination of predicted turnover and payment terms to ensure that, if payments slow or stop, you will get an early warning sign.

Once the account is set up it must be monitored, both on your system and via the monitoring service available via the Reporting Company you use. If you decide to operate Credit Insurance then stick to the suggested limits and, when they pull cover on a customer, think about doing the same. 

Step 2: Have a Credit Policy and stick to it

A Basic Credit Policy should be relatively straight forward to construct and is essential for any business offering Credit.

This should contain the following elements:

  1. Credit Assessment, & Account Opening Procedures
  2. Terms & Conditions of Sale and Payment
  3. Query Notification / Credit Note Authorisations
  4. Sales Ledger
  5. Overdue Account Collection Procedures
  6. Credit Limit Reviews
  7. Reports
  8. Credit Insurance and/or Factoring
  9. Insolvency Procedures

Once this has been constructed and implemented it is essential that the Policy is bought into by all departments and then stuck to from then on. 

Step 3: Build rapport with your customer

For businesses of any size, the key to effective Credit Control is the ongoing relationship with their customers.

Customers should be contacted early on in the process, before even the invoices fall due, to check that they have them and that there are no problems.This will make it considerably easier to chase when the debt does fall overdue as rapport will already exist with the key individuals within the organisation.

Send out Customer Surveys which focus on the Collections process to ensure that the customer has a positive view of this function and review it regularly. 

Step 4: Have the right staff in the right environment

Credit Control may not be viewed as a skill in the same way as Accountancy or Law, but it requires a particular calibre of person.If you have the wrong kind of person carrying out this vital role for your organisation, the results can be catastrophic as you could lose customers and cost the business a lot of money.

The Credit Controller needs to be assertive and direct, yet polite and persuasive, without ever sounding rude or abrupt. There is a very fine line between thinking you are one thing and coming across as another.

When recruiting for this role you need to ask the right questions and ideally put them on a test case to see how they handle themselves in a real-world situation.

At Credebt we can help you with the recruitment process to ensure you get the right person for the job. 

Step 5: Have an adequate Query Management System that everyone supports

There are many good reasons for having an effective Query Management system:

  • It allows you to ascertain which Customers may be unhappy with your processes that are causing them issues.
  • You will be able to ascertain which Customers are Won’t payers and Can’t payers, as you will be eliminating a major reason for a delay in payments which may or may not be genuine.
  • It lets you improve your processes and streamline things for the future.
  • You will be able to release cash from your Order to Cash process into your bank, where it belongs.
  • Staff members and Managers who are causing the issues can be targeted to improve their performance.

It is essential that everyone buys into this process to make sure it works. You’ll need to hold weekly or monthly meetings with the main individuals that are generating the queries. 

Step 6: Communicate all issues quickly when required, both internally and externally

Credit Assessment can give you the information you need when you set the account up.

Monitoring the finances is also essential for Risk purposes but in today’s economic climate that is not enough.

Make sure your business has a policy of communicating everything that is heard about your customers, no matter how unimportant anyone will think it is.

Monitoring Financial risk is important, but the data is always out of date so being aware of the current situation is also required.

If you are ever in doubt, then don’t be afraid to open the lines of communication with your customer and even request management accounts if you have concerns. 

Step 7: Report and Review performance regularly

In business things can change very quickly and a customer that was credit worthy one day can be a bad risk the next. It is therefore essential that you monitor and review their performance on a regular basis.

There are several reports that will help you monitor the performance of the Credit Function in your business:

  • Aged Debt Report
  • KPI reports including Debtor days and Bad/Doubtful debt targets
  • Cash flow forecasting for 3-6 months in advance
  • Top 20 Customer detailed report of debt and any queries
  • Outstanding Query report by division
  • Bad Debt Provision amount vs Bad Debts to date

These should all be reviewed on a regular basis and progress monitored closely.

How can we help?

These are the 7 steps to successful Credit Control. We hope you find this information useful and that you will be able to improve your Credit Control.

Please remember that we are experts in this field and that we are here to help. If you want any assistance with any of these steps, feel free to contact us for a free, no obligation assessment of your Credit Control.

Call us on 0845-6385256 or email

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