20 Step Guide to Credit Management

Factoring Finance Info Business Guide

Managing a business in boom times can't fully prepare you for the challenges of a downturn. As a result cash flow has naturally emerged as the business-critical concern.

To survive and thrive, companies today need stronger credit management skills than ever before. With most businesses now spending far more time chasing debtors, invoice finance with credit management services is becoming increasingly popular - amongst businesses large and small.

This straightforward 20 Step Guide to Credit Management focuses on the vital issues for your company.

Fortis 20 Steps Checklist

Invoices
1. Check that all invoices are correct in every respect
2. Clearly indicate the terms of payment on each invoice

Credit Notes
3. Monitor the number and value of credit notes (no more than 2-3%)
4. Segment credit notes by reason of issue to identify recurring problems
5. Put clear credit procedures in place and allocate one person to sign off credit notes.

Debt Turn
6. Set debt turn and overdue debt targets and review performance against targets monthly and at every Board meeting
7. Implement a control system or “trigger” if your debt turn or delinquency debt profile slips
8. Compare industry and competitor debt turn performance

Sales
9. Only pay your sales team commissions on paid debts, not invoice value and make sure they know your terms of trade

Insurance
10. Consider taking out credit insurance on domestic and export debts as protection against insolvencies
11. Think about insuring export debts for protracted default

Credit Control Procedures
12. Create credit control policy documents detailing how debts will be chased, when legal action will be taken etc and ensure that all relevant staff have a copy
13. Issue debtor statements monthly and on the same day every month
14. Give your bank account details to debtors and encourage payment by BACS
15. Allocate cash to your sales ledger on a daily basis, review unallocated cash weekly and reconcile every account at least monthly
16. Ensure sales ledger is backed up every night and have contingency plan ready in case the system fails
17. During staff holidays or extended absences use specialist temps or agencies to cover

Chasing Overdue Debt
18. Have an external lawyer ready with 7 day legal letters and the ability to take county or high court action already set up
19. Be prepared with 7 day legal letters and the ability to take legal action against international debtors already in place
20. With foreign debtors make sure that credit controllers can speak the language of the debtor - or source an external agency to act on your behalf.

Failure to put these 20 steps in place could result in failure for many cash starved businesses in the UK. Yet implementing a professional credit control programme can easily distract from gaining new business which will ensure a company’s sustainability. It seems a ‘catch 22’ situation that is, until now.

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