Speed Up Payments and Prevent Bad Debts in Your Business

How do I get paid quicker and reduce the risk of Bad Debts in the business?

Having an effective credit control is crucial for maintaining a healthy cash flow and minimising bad debt within a business. When it comes to credit control “Proactive rather than Reactive” is the name of the game and below I share with you some of the best tactics and recommended processes to ensure effective credit control in your business:

Clear Credit Policy

Clear Credit Policy:

Establish a clear and well-defined credit policy that outlines the terms and conditions of credit sales. This policy should include credit limits, payment terms, late payment penalties, and the process for credit applications.

Creditworthiness Assessment

Creditworthiness Assessment:

Conduct a thorough creditworthiness assessment of potential customers before offering credit. This can involve checking their credit history, financial statements, and contacting trade references.

Credit Limits

Credit Limits:

Set appropriate credit limits for each customer based on their financial capacity and payment history. Regularly review and update these limits as the customer's circumstances change.

Prompt Invoicing

Prompt Invoicing:

Send out invoices promptly after the goods or services have been delivered. Clearly state the payment due date, payment methods, and any applicable discounts for early payments.

Follow-Up on Overdue Payments

Follow-Up on Overdue Payments:

Monitor accounts receivable regularly and follow up on overdue payments promptly. This can involve sending reminders, making phone calls, or using automated systems to notify customers of their outstanding balance.

Offering Incentives

Offering Incentives:

Encourage early payment by offering incentives such as discounts for early settlement or providing credit terms that reward prompt payment.

Effective Communication

Effective Communication:

Maintain open and effective communication with customers regarding their outstanding balances. This can help identify any potential payment issues early on and allow for mutually beneficial solutions.

Credit Control Team

Credit Control Team:

Designate a dedicated credit control team or individual responsible for managing credit accounts, handling collections, and resolving payment issues.

Debt Collection Policy

Debt Collection Policy:

Develop a clear debt collection policy that outlines the steps to be taken when an account becomes seriously overdue. This policy should include escalating actions such as issuing formal demand letters or involving debt collection agencies if necessary.

Regular Reporting and Analysis

Regular Reporting and Analysis:

Generate regular reports on accounts receivable, overdue payments, and bad debt levels. Analyse this data to identify trends and areas for improvement in the credit control process.

Training and Education

Training and Education:

Ensure that staff involved in the credit control process receive appropriate training on credit management, customer communication, and debt collection techniques.

Use Technology

Use Technology:

Leverage credit management software and accounting systems to automate processes, track customer payment histories, and streamline credit control operations.

Establishing customer Relationships

Establishing Relationships:

Building strong relationships with customers can foster trust and encourage timely payments.

To Summarise

By implementing these tactics and processes, businesses can significantly improve their credit control, reduce bad debt, and maintain a healthy financial position. It’s essential to be proactive and consistent in credit management to ensure the overall stability and success of the business.

If you are interested in outsourcing your accounts receivable or credit control feel free to contact me at laura@solve.ie


Laura Dunne, Credit Manager in Solve Outsource



Laura Dunne