- creditors and
Success in managing the first three affect cash, which can be reinvested in the business or distributed.
Many local businesses are plaqued by slow payment of invoices and it is a problem in many other countries too.
A statutory right to interest has been in place for a number of years but nothing seems to make much difference.
An improvement can significantly affect working capital.
It is a great problem for managers, who sometimes are frightened of upsetting customers and feel that there is little that they can do.
This is completely the wrong attitude.
Customer relations must always be considered, but a great deal can be done.
Some practical steps for credit control are summarized below:
- Have the right attitude; ask early and ask often.
- Make sure that payment terms are agreed in advance.
- Do not underestimate the strength of your position.
- Give credit control realistic status and priority.
- Have well-thought out credit policies.
- Concentrate on the biggest and most worrying debts first.
- Be efficient; send out invoices and statements promptly.
- Deal with queries quickly and efficiently.
- Make full use of the telephone, your best aid.
- Use legal action if necessary.
- to keep stock as low as is realistically feasible and
- to achieve as high a rate of stock turnover as is realistically feasible.
- the wish to have stock as low as possible, and
- the need to keep production and sales going with a reasonable margin of safety.
- Suppliers will try to compensate with higher prices or lower service.
- Best long-term results are often obtained by fostering mutual loyalty with key suppliers; it pays to consider their interests.
- If payments are already slow, there will be less scope for taking longer to pay in response to a crisis.
- keen prices,
- good service and
- perhaps prompt payment discounts.