Do you offer credit to your business customers? If so, you will understand the importance of an effective credit management strategy. Here are 10 tips to ensure you get paid promptly.

1. Offering credit terms to your customers should be based on a commercial objective decision and not the lure of increased sales. Decide whether or not you can set a minimum level of credit which your business can offer without credit checking. Any new customers who require higher credit limits should then be subject to a credit check.

You should set a firm policy on credit limits including a pre- determined series of actions to be taken if a credit limit is reached or exceeded.

2. Your terms of business including payment terms must be communicated clearly to your customer at the outset. Standard payment terms should include the agreed credit period; your right to claim statutory interest or compensation if payment terms are not met and appropriate timeframes for raising queries and how they will be dealt with.

3. Invoices need to be set out in a clear and easy to follow format, state the invoice date, invoice number, account number, order number, amount due, the date by which payment must be made and the available methods of payment. Always provide a breakdown of the amount due. Always include your payment terms on the front of your invoice and your terms of business on the reverse.

4. It is good practice to identify the individual at your customer’s business who has the authority to approve your invoice for payment, get to know them, and send your invoice directly to them.

5. Statements should be sent out on at least a monthly basis, ideally as early as possible in the month and should be up-to-date so as to include all previous months transactions including invoices, credit notes and payments. Statements should also quote the payment terms and payment methods for easy reference for your customers.

6. All major customers should be contacted by telephone to confirm invoice receipt, agree the balance to be paid and the date of expected receipt of payment. The credit controller should obtain a firm commitment from the customer to pay all amounts due. The credit controller must be empowered to speak on behalf of your company and have the degree of authority necessary to deal with any account queries or problems.

7. Chase letters should be used as a secondary tool to the telephone. An initial letter should be sent warning of statutory interest and compensation charges for late payment. A follow up letter in seven days should be sent with an interest charge warning of debt recovery action and giving a seven day deadline to pay.

8. Make sure you have a process in place to acknowledge, investigate and respond quickly and efficiently to customer’s invoice queries to minimise delays in paying. If the query does not relate to the full invoice value, always request payment of the undisputed amount in the interim.

9. You will invariably encounter customers who for whatever reason will advise you they are unable to pay. In these circumstances you should exercise your right to statutory interest and try to negotiate a payment plan. The plan should be in writing and both parties should be clear on what action will be taken should the payment plan not be adhered to.

10. Where a legal action is necessary it should be taken without delay once your final warning letter has been sent. Debt collection agencies usually work on a no recovery, no fee basis but their fees can be a fairly high percentage of the monies recovered. Legal action where defended can be an expensive process with minimal recovery so careful consideration on the chance of success should be given before commencing legal action. âóè

Cheryl O’Brien is Credit Manager at Chiltern Group Services plc.