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Good Credit Control

Good credit control starts the moment the customer first walks through the door.

Good credit control starts the moment the customer first walks through the door.

  1. Get as much information about your customer - do a credit check
  2. Set realistic credit limits - and keep to them
  3. As soon as an invoice is overdue do not delay - take action

It is essential to get as much information as possible about your customer and to know just who you are dealing with.

You need to know the legal status of the customer. Is the customer a company or a partnership or sole trader? Difficulties may arise at a later date if all you have to go on is a trading name.

The decision to allow a customer time to pay should be based on knowledge. There is always the risk of non payment but you owe it to yourself to do what you can to protect your business and keep the risks to a minimum.

Do a credit check. A status report from a credit agency can put you on notice if a customer has had a bad payment record or County Court judgments registered against it and you can obtain a credit rating based on the experience of other suppliers.

There are different methods of fixing credit limits, setting the limit to support sales levels or based on the maximum amount you are prepared to be owed. You must set realistic credit limits and keep to them. A customer's account needs to be monitored regularly and not allowed to drift out of control.

It is important to have written terms and conditions of trading and essential to bring them to the customer's attention when the contract is made. The terms of credit should be clearly set out, leaving no doubt about when payment is due.

As soon as an invoice is overdue immediate action must be taken. Do not delay because the older the debt the more difficult it is likely to be to collect it. The reason for being in business is to make a profit and not just sales figures. A sale is not complete until it is paid for.

If, despite your own efforts, the debt is not paid then instruct properly qualified debt recovery professionals to chase payment on your behalf. Make sure you know from the start how much it is going to cost you and measure collection results. You should expect to be kept informed of progress and consulted about the action to be taken.

For further information on debt recovery or to make an appointment for an informal first discussion call Rob Winder on 01228 552222 or email rw@burnetts.co.uk.

About the author

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Rob Winder

Senior Associate Rob leads the Debt and Property Recovery team and is head of the Penrith office.

Published: Friday 6th May 2011
Categorised: Debt Recovery, Commercial Dispute Resolution

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