To most business owners it will be apparent that the solution to making credit control work lies in avoiding the extremes of bieng too aggresive or too lax with your credit control system, speaking personally nothing turns me against an organisation more than when they aggressively demand payment even before the pay by date is reached. In every case like this I have made them wait even longer for payment in an effort to annoy them as much as i have felt annoyed by th

em, at the same time I have had invoices to pay and put them aside as they were not due and have let them go overdue until another reminder was sent. Clearly being too passive is less damaging to your client relationships but will destroy your cash flow as surely as being too aggressive will destroy your reputation, the problem presented by credit control to the small business is self evident.

The remedy.

First let me say that I do not believe there is a one size fits all answer to this issue, more a selection of possible remedies that will allow you to control your cash flow whilst keeping your customers on your side.

Outsourced Credit Control

Outsourcing your credit control will be an answer for some, contacting out your invoicing may relieve some of the worries, for large companies this can be a useful solution, however smaller businesses tend to have closer ties with their clients and outsourcing such a critical process as credit control could be harmful, the relationship that exists between your client and you means you may know of reasons why you should hold back collecting for a while or not, this control os lost with outsourcing and while for large entities that is ok, i counter that for small ones it is not.

Credit Control Software

Software for credit control offers a controlable and scaleable solution for small businesses, the benefits include the reliabilty of account due information and reminders, lack of simple errors destroying carefully crafted relationships and of course it will not forget things. Control is maintained in house and should a client have particular issues it is possible for the company to either over ride the software or input the data to allow the software to cope with the issue. Some software solutions can be complicated and expensive but some are very affordable for all but the smallest businesses, look around before diving headlong into a purchase and you will find a perfect match for your needs and budget, all you need to be wary of is makin certain that any software you invest in is scaleable, your company will grow and you don’t want to have to change the sytems infrastructure you are using because your current solution can not grow with you.

Selling Invoices

Invoice factoring is a financial arrangement between yourself and a financial organisation (the factor) whereby you basically sell your accounts receivable to the factor for an immediate payment usually a percentage of the total accounts due. For example a client has purchased services from you for $5000 and they are billed immediately with payment terms of 60 days, you need the cash flow so instead of harassing your client you sell the account to the factor who pays you the account less a percentage in this case, 10%, so you actually receive an immediate payment of $4500. Once invoiced the account is no longer your worry, the factor deals with everything including chasing, reminders and non payment.. This is a useful service for companies that have to give longer payment terms but cannot afford the lack of cash flow; although they lose some income in commission to the factor they get immediate payment and never have to worry about that debtor again.

Credit Control

Although each solution has attractions credit control software offers the most flexible solution without giving control to a third party, if you cannot afford dedicated in house credit control then software is the best solution for you. whther you choose to manage your credit control this way or not ultimately is not as important as managing it in some way, without management of this critical business function your business is doomed from the start.

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