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Understanding Credit Control (and how to improve it!)

Understanding your business’s credit control is crucial for maintaining a steady cash flow and safeguarding the business’s financial health. Sounds important? Well, it is, but how does a business improve its credit control.

In this article, we will explore the key aspects of credit control along with 6 strategies to help ensure your business remains robust and thrives.

What is credit control?

Credit control is the management of a business’s credit risk. It ensures customers pay within agreed terms which is crucial for maintaining liquidity and preventing financial instability.

Poor credit control can lead to cash flow problems, increased borrowing, and potentially, insolvency. So understanding its strategic role helps businesses avoid these pitfalls and maintain a strong financial foundation.

The dual approach of proactive vs reactive credit control

Proactive credit control involves monitoring and managing credit risks before issues arise. This can be done through using credit checks and setting clear payment terms. Proactive measures prevent debt and create customer trust.

Reactive credit control is implemented after payment issues occur. It includes actions like sending reminders, negotiating payment plans, and pursuing legal measures if necessary.

Reactive methods help recover receivables and mitigate financial losses.

Strategies for improving credit control

1. Communicate with late payers

Effective communication is key to managing late payments. You can achieve this by maintaining a professional tone, clarifying the consequences of non-payment, and offering solutions like payment plans. Also, try to build a relationship through regular phone calls.

Making or strengthen relationships helps with understanding and also promotes timely payments and understanding often helps make business easier.

2. Create a watchlist

A watchlist monitors the credit risk of customers with potential payment issues. Regularly
update customer data, track payment histories, and review credit scores to prevent financial

3. Define clear credit policies

Clear, documented credit policies should specify credit terms, payment deadlines, and actions for late payments, ensuring consistent and fair credit practices.

4. Credit checks and monitoring

Begin with credit screenings at customer onboarding and update assessments regularly to catch potential risks early, allowing for timely adjustments to credit terms.

5. Communicate first

Don’t wait for your customer to be late – be proactive and check in with them a few days after invoicing to check they have received your invoice and it has been approved for payment. If you have 30 days terms, then get in touch 10 days after invoicing to check
everything is OK.

6. Change the game!

Most times credit control is about collecting the money more efficiently – but can you pivot and change the game? By this I mean can you get your customers to pay before you get into a credit control situation? Could they pay in advance, ie on order, or at the time, ie on delivery. Could you automate payment by swiping their card at the point of order, even if actual payment is taken later? In other words, how can you change the rules so that you don’t have a credit control problem?

When to consider outsourcing credit control?

Signs it might be time to outsource:

  • Increased late payments: A rise in overdue accounts may indicate the need for specialised expertise.
  • Resource constraints: Small or overburdened teams could struggle with the burden of credit management.
  • Scaling challenges: If your teams are struggling to keep up with business growth, this could justify outsourcing.

Benefits of outsourcing:

  • Expertise and efficiency: Outsourced agencies offer specialised knowledge and systems to improve cash flow.
  • Cost-effectiveness: Outsourcing can reduce overhead costs compared to maintaining an in-house team.
  • Focus on core business: This allows you to concentrate on primary business activities without the distraction of credit management.


  • Control and communication: Outsourcing requires relinquishing some control; ensure clear communication and alignment with your business values.
  • Customer relationships: Choose a provider that maintains your company’s reputation and treats customers respectfully.

Outsourcing credit control can significantly enhance financial efficiency if aligned correctly with your business’s needs and values.

Empower your business with robust credit control

Your business’s financial health relies on robust credit controls. Ensure you adopt proactive strategies, and perhaps even outsourcing to ensure you’re getting the best from your finances. Reviewing and enhancing these processes ensures stability and supports business growth.

Ready to enhance your credit control?

Contact us for expert assistance in streamlining and automating your procedures, ensuring a steady cash flow and peace of mind. Not only can we help you to review your processes and procedures, but you can delegate this and we can make it really easy! Contact us at [email protected]

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