Every Person in business already knows the worth of having a credit control function. Still many small businesses in Dubai struggle to get the money due to them because of poor credit control processes. There are credit control mistakes and then there are credit control mistakes. This article discusses the nine biggest credit control mistakes that cost businesses money. Keep these in mind when developing your policy.
For those who do not know what credit control is, let’s explain it first. Credit control basically is collecting the money due to you. Normally small startups in Dubai do not have formal credit control process and they simple send invoices some of which are always not paid on time. If your business in Dubai is sending more than 25 invoices, it’s better to have formal credit control structure.
Credit Control Mistakes to Avoid
1. No dedicated credit controller
Sometimes small businesses put on the responsibility of finance management on their existing employees who do not have expertise in the area and they are required to handle multiple areas. Instead of taking away staff’s primary roles, it is better to put credit controller in charge to get optimum results.
2. Supposing that all clients are same
Not all clients are same. It is possible that you will have many customers who process your invoices the same way, but some do differently as well. So you may encounter a problem getting paid if your customer didn’t like the invoice you send. So always ask your new customer about who to talk to when getting paid, what information should be given and when do they run their payments.
When you know the answers of above questions, your payments will not be delayed and you will also not be chasing wrong person when due date is passed.
3. Defining unclear payment terms
Your payment terms should not be vague. They should be clear and contain information such as how long your customer must pay you and identification of any late fees. You must put these in a condition of sale document and get your customer to sign it (physically or digitally) before starting doing business. Clear terms do not confuse your customers and do not let them put as a defense for late payment.
4. Slow invoicing
The best time to send invoice is when delivering the product. At this time, customer has most goodwill to pay.
5. Shying away from phone
When due date is up do not shy away from the phone. Call them and inform them that they are late. Most invoices can be collected by just sending email alone so do not hesitate.
6. Making empty threats
If a customer is repeatedly paying late, you may have to take an action such as charging late fees and interest, stop supply of goods till payment or taking them to court. Do not make empty threats, if you are serious do it or your customer will not take you seriously again.
7. Forgetting your team mates
Finance management is responsibility of the persons in charge but other sales staff and account managers can also help when customers account are overdue. They can leverage their relationship in order to get an invoice paid.
8. Not offering a range of payment options
Always give your customer choice in payment methods. Clearly state these on your invoice. If it is easier for customer to pay, it will be easier for you to being paid.
9. Trying to do more than you can handle
Credit control process is challenging and time-consuming. If you are struggling, you can outsource your credit control function in order to improve cash flow. This will give you time to focus more on core functions and growing your business.