A brief description of some issues around and potential solutions with credit control. It is meant to be viewed as a starting point for how some issues could be addressed rather than a one-size fits all for companies.

1. Improve your Credit Control
Function
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2. What is your Credit Control Function?
• Decide on what you want it to be.
• Reason – Deciding on what you want it to achieve will enable you to make some good cash
decisions.
• Example:
• If the credit control function is to recover cash invoiced then it may be involved after the
transaction or good or service has been delivered.
• However if the credit control function is to ensure that liability is minimised then it may
be more advantageous to introduce it earlier in the process
• Reason and how to achieve
• By allowing the credit control function access to ongoing orders and to
materially evaluate any potential debts that may arise, advice can be given as to
whether a service or good should be delivered with a cash payment up front.
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3. What exactly are you trying to improve?
• Define your metrics or KPIs as a starting point.
• Reason – If you want your Debtor Days (DSO) to improve, decide on what you
believe is the measure to begin with and when it will have improved.
• Example:
• Company DWT has lumpy revenue over the course of the year. I would recommend
measuring DSO over a 12 month period to iron out any anomalies
• Company BUR has relatively flat revenue over the course of the year. In these cases I
would recommend 3-6 months to cover all eventualities.
• Agree your own DSO measure and stick to it
• (Debtors/Invoiced sales in period) x Time Period in Days.
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4. Break down into smaller steps
• Company BUR has standard terms of 28 days after invoice sent for payment
• Establish a timetable of tasks with regards to each invoice
• Example
• Day 0 – Invoice sent to client
• Day 4 – Confirmation with client that invoice has been received and all matters are
correct. If not already known, investigate payment dates with relevant person i.e.
pay at the end of the month/every second Friday etc.
• Day 14 – Send statement of account to client.
• Day 22-25 – Confirm with relevant person that payment will be made as previously
agreed
• Day 29+ If payment not received discuss with client re-affirming previous discussions
and escalate subject to internal policies
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5. Stakeholder Buyin…
• The list of reasons that clients do not pay is long and I will go into in further
presentations. To get buy-in from company stakeholders I would suggest a no. of
tactics. No-one solution will fix all issues but they can make a difference.
On a particular time period distribute to all sales/account managers
(subject to internal policies) a breakdown of aged debt by each
manager – Reason: Everyone likes to look better in front of their peers!
Result: Managers proactively asking if they had any problem clients prior to
report being issued and dealing with
Another company I worked for had a bad debt charge levied by the group
head office dependent upon the aged profile
Solution: 45 days prior to the end of the quarter a danger list was prepared
(with the cost of the charge and those responsible) distributed to all.
Result: DSO dropped by 10 days.
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6. Credit control is a process
• Started by evaluating the DSO. Implement a policy for 3 months and
evaluate. Find out what works and what does not work. Beware the
phrase, “We have always done it like that”.
• If you have a team of controllers is there a performance issue that needs
investigating?
• Set metrics for staff and investigate variances. How long should they be on the
telephone for over the course of a day/week/month?
• How many accounts should they have each?
• Is the software fit for purpose?
• If there are any variances between staff, investigate why? Is a standard script being
used or there is one and people are deviating from it?
• Keep list of reasons for non-payment and investigate. If the invoice is always sent at
the wrong amount, why and what needs to be done to correct action? Should the
account manager sign off each invoice?
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7. About the Author
• With 18 years of experience in a range of industries, Ciaran Mc
Donald has implemented a variety of solutions for clients saving
£000s.
• Thanks for taking the time to read.
• Please contact for a meeting and a coffee to discuss your organisation
and how we can make it better.
• ciaranmcdonald@aspire-finance.co.uk
• 07971 790 724
• www.aspire-finance.co.uk
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