Who is it important to have good credit control procedures in place?
Credit control is important, especially for small businesses. Therefore, all small businesses must ensure that they collect their outstanding invoices. In the UK, some small businesses let their uncollected invoices accumulate, which affects the performance of the general business along with their cashflow. This problem may directly be an outcome of poor credit control and little knowledge about the benefits of good credit control procedures within a small business.
Having sufficient funds to ensure that the business runs smoothly is one of the main benefits of good credit procedures within a small business. The outstanding uncollected invoices hint that the business has some money which is available but can’t be used for business operations. In small businesses, this is a major issue because they don’t have sufficient funds to run the various operations without gathering the outstanding invoices as needed. This makes it important for a business to make sure that it has formulated good procedures of credit control so as to make sure the business runs in a smooth manner, with adequate funds available. It is also important to have good procedures to let businesses know if they are reliable and have trustworthy clients because having good procedures in place will allow the business to describe to its various clients how and when the invoices will be gathered. The reliable clients will adhere to the payment terms, thereby ensuring that the invoices are ready by the time given by the credit-control procedure. As a result of this, the business can identify the clients that comply with their payment terms, and therefore it becomes simpler to extend credit to such clients since they keep their word.
The second benefit of having a good credit control procedure in place is that businesses become able to plan properly. A business with good control procedures will be able to identify the money it has and the money it expects. Consequently, the businesses will be able to budget even on the uncollected invoices since the laid down procedure will make sure that the outstanding invoices will be collected promptly. Having outsourced providers will offer the business time to concentrate on other issues with respect to business growth. Moreover, certain outsourced providers even pay for the uncollected invoices and then proceed to gather the invoices after the communicated dates. This offers the small businesses the assurance that funds will be available on time to carry out the various business operations.
Good credit control procedures that improve the collection of a business’ outstanding invoices are also advantageous because it enables a business to control credit limits. In the UK, small businesses should have a credit limit. This means that these firms should have a limit of the outstanding invoices. When the set limit is surpassed by the outstanding invoices, it may become difficult for the business to extend credit to other clients. However, with good credit control procedures in place, the small businesses will be able to establish limits and be able to extend credit to other clients and also to those whose standing invoices have been gathered. Therefore, it’s important for a small business to have good credit control procedures in place which will improve their collection of outstanding services.