Credit Control Lunch and Learn session for new start ups. Improve payment performance with active credit management. Some fundamentals on credit management.

1. Credit Management
Peter Ramsden
Paramount Learning

2. Importance of Good Credit
Management
 A sale is incomplete until
the money is in the bank.
 Cash flow essential for
continuance in business.
 Good credit and financial
risk management is an
essential part of everyday
business.

3. Why credit check?
 Needs to be a conscious decision and not
based on gut feel
 Protect your business
 If you knew the client was about to go bust or
had CCJ’s or a history of late payment how
would that affect your decision to extend
them credit?

4. Minimise Risk Upfront;
Good Practice
 Any doubt on risk of getting paid:
Do a credit search
 Lots of external companies do
credit risk searches
 Check invoices for accuracy:
send email and by normal post.
www.equifax.co.uk
www.dnb.co.uk
www.experian.co.uk

5. Ways to check credit
worthiness
 Credit agencies
 Trade reference
 Bank reference
 Register of County Court Judgements
(CCJ’s) Approx £4.5 per request
 Companies House provides accounts
information
 Ask client to complete an application for
credit form

6. How much credit to provide
 Set limits you are happy with;
1. If references are OK chose a credit limit and stick with it
even if that means that you fall short of customers
specified terms. Normal may be two months of projected
sales with client if it is repeat business.
2. Ensure your risk portfolio is balanced. Do not have too
much credit in one or more clients.
3. If transaction is one off business you need to be more
judicious in setting and negotiating credit terms since you
have no ongoing leverage when asking for payment.

7. Typical Excuses for late
payment
 Did not receive invoice
 Data on invoice incorrect – Invoice in dispute
 Cheque is in the post
 Cheque awaiting signature
 Product supplied is incorrect or not as specified
 Our payment terms are longer than on the invoice
 You have missed the payment run
 Cash flow problems; waiting payment from our
debtors
 Invoice did not quote client order number

8. Risk Reduction Techniques
 Proforma Invoice  Letter of credit
 COD/CAD’s  Invoice Factoring
 Part Payment  Invoice discounting
 Staged Payments  Credit insurance
 Discount for early  Good credit management
settlement processes
 Prompt payment rebates  Take professional advice
 Bank Guarantees before entering into
factoring and invoice
 Visa and debit cards
discounting
 Paypal

9. Cash Collection
 Make credit terms very clear
 Terms and conditions on reverse of invoice
 Open new accounts with application for credit form
 Issue effective invoices quickly
 Build relationship with accounts payable staff
 Check invoices for accuracy
 Use electronic forms of collection (BAC’s Direct
Debit, Visa etc)
 Use late payment legislation to recover costs and
interest lost