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Frequently Asked Questions - Credit Control - Polic

There should be two(2) components to a good policy.
1. A clear written strategy about doing work, or supplying goods to customers, which may include doing this on credit with payment terms, or otherwise, and’
2. Clear written strategy for management of the business debtor ledger.
The business policy should include inter alia the following:
a. Clear disclosure regarding pricing;
b. Clear disclosure regarding terms;
c. Application for credit;
d. Due Diligence on new clients;
e. Agreement;
f. Invoicing;
g. Monthly Statement;
h. Collection Policy

Good credit control starts at the very beginning making sure that a customer does not become confused with Terms and Conditions, leading to disputes and non-payment. The business must advise customers of Terms & Conditions clearly, prior to engagement for supply of goods and services?
Some Terms and Conditions could include for example:
1. Payment in full in advance for services;
2. Part Payment in advance for services;
3. Credit to a particularly value and payment with 7 days;
4. Credit with personal guarantee.
A business may consider obtaining a deposit or part-payment of the estimated total invoice before commencing work or delivering goods. By requesting part-payments throughout the provision of these goods and/or services the business will dramatically reduce the amount owning and can minimise the loss. Should payments not be made, the business is in the position to reduce or cease the provision of any more goods and/or services until payments are made. This ensures it maintains control.

End of the Month Statements of Account are important. Many business pay statements of account monthly, and not individual invoices. The issuance of Statements of Account will assist in debtor collection. Where accounts are not paid, the business should telephone the customer within a specified time. (E.g. 5 days) and enquire as to the reason for non-payment

Make all applicants complete a comprehensive Credit Application where they should supply at least the following information:
✓ Full name and date of birth; (with 100 points identification)
✓ Current residential address: (with written verification)
✓ Contact phone numbers;
✓ Contact Email address;
✓ Company or business details: (with evidence including relevant registration particulars)
✓ Company Address: (with written verification)
✓ Contact phone and email address;
✓ Accounts Payable person particulars;
✓ 3 x Trade references;
✓ Statement of Asset and Liabilities; Once you have this information undertake the following enquiries:
✓ Prove business entity exists and is registered to trade;
✓ Undertake court/litigation searches with respect to the business entity, and owner/shareholder;
✓ Undertake credit searches with respect to the business entity and owner/shareholder;
✓ Contact Trade references and verify past history of compliance with payments;
✓ Check the company web site including published address particulars. Undertake general internet search engine searches to identify any information of assistance.

The business should have each customer seeking to trade with it on a credit basis complete an application for credit. This application form will contain all of the pertinent details to find the Customer but should also give the business enough information to decide whether it is willing to trade with them on a credit basis.
A worthwhile consideration is checking the previous trade history of the customer. These details are included in the application form. We recommend that you complete a Trade references check. This will let you know if they pay their invoices on time and what they are like to deal with on a credit basis. The more information you have to base your decision on the better informed you will be.
Once you have decided to trade with a Customer on a credit basis we recommend that you send them the documents covering “Credit Approval”, “Terms and Conditions of Sale” and a Guarantee document. It is important you get these documents duly signed, witnessed and returned.

No. The business should send an invoice as soon as possible after supplying the goods or services. When this is done, will depend upon the type of business, but there should be no excuse for waiting anymore than 3 days before you invoice your customer.
It is important customers are invoiced when they still remember what a good job you did or how good the products were. Every day that passes sees a reduction in the gratitude they feel and therefore less likelihood of prompt payment.
Terms to be outlined on invoice.
The invoice must provide a “pay by” date that can be 7, 14 or 30 days or whatever is usual for your industry. This must not vary from the date that is contained in the “Terms and Conditions of Sale/Service Agreement” and will just be a reminder of when payment is due.
The invoice should also set out the conditions and penalties in relation to the provision of credit and again these should not differ from those contained in the “Terms and Conditions of Sale/Service Agreement”.

It is important the sooner the bad debt is recognised, the sooner action is taken to recover that debt the more likelihood of success in its recovery.
If you have maintained contact with the client and the debt remains outstanding this is when you should start taking further action. The debt is still fresh at this date and is not too dated. Depending on the nature of the service and the industry will dictate the discretion you use in relation to the time period.
You should telephone the Customer to ascertain the reason for non-payment what the problem is. It can be easy to ignore a letter but not so easy to ignore somebody on the other end of the line.