Dealing with credit control

If you sell goods or services on credit, you are effectively giving your customers an interest free overdraft.

Managing this via good credit control procedures is critical. And the key to good credit control is accurate and up to date information. At Momentum Bookkeeping, we want our clients to be able to grow and develop without the constraints of having to deal with the time consuming hassle of doing their own bookkeeping in house.  We handle the credit control for many of our existing customers as it helps them to focus on what is really important to them.

And that is exactly what we have recently done for this particular client.

The problem they had

We had a client who was experiencing problems getting paid promptly by a significant proportion of their customers. In addition to having an obvious impact on cashflow, slow payers very often become non payers, meaning an increase in bad debt.

The Solution

While we won’t normally provide credit control in the form of chasing customers on the behalf of clients – That relationship is much too sensitive and important to ask a third party to manage – we work with clients to improve their processes, particularly focussing on providing good, up to date information on debtors.

With this particular client, we moved our service from a quarterly service, based around their VAT filing requirements, to a weekly service. We were given (read-only) access to their online banking, and every Monday we brought their bank up to date on our software, allocating any monies received against outstanding invoices and highlighting any issues that may be present.

We would then send an Aged Debtor report to the client, along with a list of any outstanding issues. For example, where a client had paid their December invoice, but not their November invoice.

Quite often, this is most likely just an oversight, but telling our client about it immediately allowed them to contact their customer promptly.
With this information being provided weekly, the client is now able to focus on the slower payers and improve this aspect of their credit control.

The Results

Before we moved to this weekly approach, almost 27% of our clients outstanding invoices were sitting at 60 days or older. So at least 1 month overdue. And 19% of them were more than 2 months overdue.

Since we have come in and helped the business with their credit control, those numbers are now down to this:

• 4.5% are 1 month overdue
• Under 7% are 2 months or more overdue.

That’s a positive change, but it only tells part of the story. Turnover has significantly increased during this period, but the overall outstanding debtors have decreased. When we calculate the Debtor Days, which is a measure of how long it takes to get paid, this number has fallen from 54 days, to 32 days! So, overall, the client is getting paid almost twice as fast as before.

The key thing here, is that we didn’t make these improvements. The client did. But we were able to provide them with the information they needed, in the right format and at the right times to help them achieve these improvements. And that is a big part of what we do at Momentum Bookkeeping.

We are called Momentum Bookkeeping because that is one of our defining values. We want to help you build momentum in your business.  Continue to grow, continue to get stronger and become the market leader in your area.

We may be based in Glasgow but we have clients across the UK who we keep in regular contact with through zoom, phone, email and scheduled face to face meetings throughout the year to ensure that we are constantly delivering what we promised them.

If that sounds like something you would be interested in then the first step is to get in touch.