Getting proactive with your credit control can help you improve your credit score and tackle your business debt.
Having a large amount of debt in your business hurts your cash flow, weakens your overall financial health and brings down your credit score as a business.
So when customers don’t pay on time, that “aged debt” is bad news for your finances. Aged debt can begin to stack up, adding to your liabilities and reducing the health of your overall balance sheet — so it’s important to tackle late payments head on.
How to improve your credit control
Being proactive with your credit control procedures and debt management can help you speed up payment and reduce your overall debt as a business.
The four steps below can help you do that and avoid the debt in the first place.
- Make your payment terms clear. State your payment terms on all invoices and create a credit control policy that’s part of the terms & conditions that customers sign up for.
- Run regular debtor reports. Check your list of late invoices to see which customers are the late payers, and where the big debts are that need to be collected.
- Be proactive in chasing late payments. Don’t be shy about asking a customer to pay their bill. Set up notifications and schedules to remind yourself to chase late-payers.
- Automate your credit control tasks. Cloud accounting platforms have built-in tools or automated credit control integrations that can automatically chase your late-paying customers as soon as an invoice is overdue.
The bottom line
Debt is just a part of business — but too much of it can harm you.
Reading your balance sheet is a good way to find out if you’re in too much debt. If you are, you should make your payment terms clear, run regular debtor reports, be proactive with late payments and automate your credit control tasks.
It’s important to tackle your aged debt as soon as possible to reduce your business’ liabilities. If you need help enhancing your credit control, contact DiMercurio Advisors today for free.
