Managing Credit Control for Your Business

Credit Control

The topic of credit control is a hardy perennial in the commercial world. This is not surprising since many businesses need to offer credit terms to their commercial customers if they are to remain competitive and increase sales. In view of the continuing practical importance of this topic, we have just updated and added to our Trade Credit Applications and Due Diligence subfolder to reflect current best practice.

Non-payment Risk Management

Allowing customers time to pay (i.e. agreeing that they have a certain period in which to pay after the goods/services have been supplied) will often give rise to late or non-payment of invoices by customers. To minimise that risk, it is essential to employ effective credit control procedures before and after credit is granted. Such procedures will include:

• a process for gathering information pertinent to establishing a customer’s creditworthiness,
• assessment of that information,
• making a decision as to whether trading on credit terms should be permitted,
• setting an appropriate credit limit and a suitable maximum period for payment,
• setting up security measures where practicable,
• adopting suitable procedures for collecting payment.

New and Updated Documents

We have made a number of changes to our Trade Credit Applications and Due Diligence subfolder. We have replaced the previous trade credit application forms with two new and improved forms reflecting current best practice. We have also added a form of covering letter that can be sent to customers with either of the new Trade Credit Application Forms. The subfolder also now includes a new Guidance Note: Trade Credit and Credit Control which outlines:

• issues to contemplate when considering whether to grant credit terms to a customer,
• measures you can take and processes you can operate in relation to credit facilities to minimise the risk of late or non-payment.