How many times have I heard this?  Well life is about to get worse as companies are going to have a valid excuse and I mean excuse rather than reason.

The Post Office workers are going on strike – I have lived through this in the past, it must be in the post office, I can’t cancel the cheque for six weeks, maybe they lost it in that strike.

Clients don’t seem to realise that it is their responsibility to pay, their responsibility to have the money in my hands by a certain date, and when that does not happen they have broken a contract.  Dam simple.  It is not my responsibility to chase you every day until you get sick of me and pay for goods or services that you have bought.

Since I left credit control as a full time job I now run my own business, and it is just as hard getting paid from customers as it was when it was a full time job.  However now I am also the one chasing up the people that I sold to – so there should never be a reason for someone not paying me.

Today I just finished my monthly calling of outstanding monies, most, in fact all are fine – they just need a reminder.  There is one company however that never pays one time and keep on asking for more than we agree at the beginning of any work.  After this payment this customer is getting the sack.

I work on fairly tight margins and this means the cash must move freely in and out – when someone gets the job done for less than they would pay elsewhere and then takes up my time and head space by making me call him every week – this is not a customer I want to have.

One of the rules I started off having when I started my business that I would work with companies that I wanted to work with – if a company makes me chase them for payment – lying to me week in week out, they then become a company that I don’t want to work with.

I wish I could have made these types of decisions while I was a credit controller, but that is not the way life works.

In the wake of the most disastrous economic climate in recent memory, the world has really been brought to its knees. The recession and stock market crash of 2008 sent waves of change throughout most industries, as businesses and financial institutions tried to claw back to profitability. With the real estate bubble crippling the U.K. financial system, causing many large institutions to close their doors, consumers and businesses have both suffered.

The credit market has been one of the hardest hit in this time period. Although many financial giants are finally regaining their footing, they are more cautious than ever when it comes to lending. Consumers are finding it harder now than in the past to buy a house, a car or even apply for a low rate credit card. Those with perfect credit are even considered dangerous if they have not enough recent lending to show they are trustworthy customers. With consumers suffering from job losses and foreclosures, there seems to be little that can be done in the short term to rejuvenate the ailing economy.

The plight of the consumer is not where this ripple ends; businesses really suffer when spending slows. With less money being lent to potential buyers, small businesses are forced to seek more financial backing to be able to keep their doors open. The credit markets are just as dire, if not more so, for business lending as they are with consumer lending. Without ample collateral to back business loans, more companies are forced to file for bankruptcy in order to keep going.

Fortunately there are glimmers of hope on the horizon for the U.K. economy, and the world as a whole. It would appear, for the most part, that the recession is nearing its end. This being said, there is still a long road to full economic recovery. There may never be a time when businesses, and consumers, are able to borrow as they were before the economic collapse. We all hope for the time when the credit crunch has loosened its death grip on lenders. Only then can small businesses and consumers be able to obtain credit for the things they need, the things the U.K. economy needs to thrive.

A debt management plan is an informal financial agreement. It involves a re-arrangement of how outstanding debts will be cleared. Creditors may be asked to accept lower monthly payments and/or freeze interest, helping you repay your debts at a slower, affordable rate.

Bear in mind, though, that repaying your debt over a longer timeframe might increase the overall cost you have to repay (due to interest). Also, creditors are not obliged to agree to any changes in the contractual agreement – if they do accept the changes, this will usually be for a pre-defined period of time (after which, they may wish to re-negotiate with you – or your debt management company).

By entering a debt management plan, you are defaulting on your original agreement. This will stay on your credit report for 6 years – which could make further credit more expensive and/or harder to obtain for that time.

If you are thinking of entering a debt management plan, it is important to consider the alternatives before you do so. You may find that a different debt solution, such as an IVA (Individual Voluntary Arrangement) or debt consolidation, is more appropriate.

Debt management might be suitable for you if:

• You can’t keep up with the repayments you originally agreed to.

• Your disposable income is lower than £200 (this is the typical minimum monthly payment amount on an IVA).

• You haven’t managed to obtain a debt consolidation loan or remortgage – possibly due to the current economic climate.

• You can afford to repay your debt in less than 5 years (the length of most IVAs).

A debt management plan might not be suitable for you if:

• You don’t have a fixed income. For example, if you earn commission-based pay.

• You won’t be able to clear your debts within a realistic amount of time.

How could you enter a debt management plan?

Debt management can be done on your own. However, you will need to be prepared to deal with any administrative work (such as phone calls and letters) and negotiations with your creditors (probably on more than one occasion).

If you don’t want to manage your debts on your own, you could contact a professional debt management organisation. By doing this, you should benefit from the experience and knowledge that the right organisation will possess. They should have experience of dealing with creditors and might have already dealt with cases very similar to yours – so they should know the best course of action for you to take.

Whether you manage your debts on your own, or go through a professional debt management organisation, creditors will only accept new repayment terms if you cannot afford to meet the required repayments on your current agreements.

To find out if a debt management plan is right for you, you should contact a professional debt management organisation.

Silver lining?  They say that ever cloud has one.  I think however that things are too tough in this economic climate to be that light about peoples life’s.

Bradford and Bingley one of the now nationalised banks that helped us get to this point is recruiting 150 more credit controller this year.  That does not sound like good news for those that are having problems with loans or mortgages.

At least when I worked as a credit controller it was most during the good time and people or businesses that were not paying had either generally made stupid decisions or were just trying to avoid payment.  I rarely had sympathy for those that I had to start proceeding against – but now…

Now I am glad that I sit in front of a computer and type this instead of calling someone who has ended in a financial mess not wholly of their own making.  From the free Credit Control website.

Generally being a credit controller is a fairly difficult and pressurised work.  Credit control in a recession from what I am hearing is much more difficult.

Speaking to a friend recently who works in a multi-national tells a story for small businesses and how the duties of credit control have changed over the last few months.

It appears that some credit managers have decided that many small businesses are doomed and hence they will have no flexibility in their credit.  My friend is now shutting down accounts of their smaller clients as soon as they reach the 30 day mark – so not one day over.

In the past, to a certain extent, I would have been a fan of this.  Most companies had the money to pay, but would push the credit period to the absolute limit – there would be the usual letters and several phone calls and the eventually they would pay up just as the account was heading onto to hold.

These companies cause are a high cost on any business – but those days have stopped.  30 days and automatic hold and interest added after 7 days – something I would have been a fan of in the past – but today I am not so sure.

However I do lead with my heart and not my wallet sometimes.  This may over time makes all companies more responsible in paying their invoices on time – something that is way over due – like most of their invoices.

Finding a tax adviser can sometimes be a difficult process if you have not had to engage an tax adviser previously.  Many small and new businesses make the mistake of completing their own tax returns in the early years.  Often a Tax adviser can save tax in areas that individuals would not be aware of – this is money well spent.

There are few things more stressful than not having a good grasp on your finances and feeling unable to approach your tax adviser. So its important to get a good one; here are some tips on choosing an tax adviser for your business:

1)   Try and choose a tax adviser before you start your business as they will be able to add value at the early stage.

2)  Don’t accept a bad service from your tax adviser. You deserve better. If you change tax advisers your new tax adviser will deal with the handover so if you are getting bad advice or service then change.

3)   Ensure your tax adviser works with small business clients and has experience in various sectors.

4)   Ask what other services the tax adviser provide – do they provide business advice, can they do accountancy or have they contacts to help grow your business?

5)   Get a fixed fee, paid monthly with unlimited telephone support so you won’t be afraid to call them when you need to them.

6)   Go with your gut feeling, if you don’t think you will be able to get on with the tax adviser after the initial meeting then you probably won’t.

7)   Ask for testimonials. A good tax adviser won’t mind if you talk to other clients.

8)   Make sure your tax adviser keeps in regular contact with your business – not just at year end!  They can hep and advise on capital purchases throughout the year.

9)   Sometimes its best to have an tax adviser who has a smaller practice as they understand what it’s like running a small business also they won’t be tempted to pass your work onto the junior staff.

10)  Make sure your tax adviser is fully qualified, for example as a certified or chartered tax adviser.  Ask them what qualification they hold and check with the qualifying body.

McNamara Associates are Accountants and Tax Consultants based in Dublin.  They offer a full service practice.

Credit control procedures differ from credit control policy in that the procedures is the implementation of the policy.  For example, when something happen (a) is the response to that something.

Having a clear set of credit control procedures ensures that your credit control department runs smoothly.  The following is a list where procedures should be thought about and written down they help to reduce the cost of credit.

Late payment

this is always the most obvious and important within any credit department.  What will you company response to late payment be.  This is a list of options:

• email customer – very quick to send a standard mail and ask when payment will be with you.
• use telephone to call customer – this is the most common method and yields the best results, however it is the most costly and takes the longest therefore it should not be used for small balances that are just overdue but kept for balances that will prove the most profitable.
• standard letters – most companies have a range of standard letters.  The first standard letter should go out automatically if payment has not been received, this should be the most general letter, see credit control letters for more detail.

Credit note requested

it is important to have a clear who does what and approves what for the checking and issue of credit notes.  If there is no clear procedure for credit note issue it is an area where clients will use the “waiting on credit note” to delay payment on an invoice, even if the credit note is only 1% or 2 % of the invoice value.

• have a written request for a credit note – do not let the client let you figure out what they want this will end up in the credit note being requested more than once.
• check and then double check the credit – two reasons.  You are not a charity and you do not give credits unless they are due, sales are often hard to come by without giving them away.  Second, and this is the most common, mistakes are made on credits note commonly, if the credit is not issued for the correct amount it will delay payment also it has to be journaled off the account and another created – this all costs time and money.
• when the credit note is raised  it should have the details of the credit on it and the invoice number it refers to.   The amount of credit notes I have seen that do not have the invoice number on it is frightening, and it makes it difficult to allocate when payment is received.
• the credit note should never be allocated against any other invoice – basic you think but it happens often.

The above is example of credit control procedures and highlights the difference between that and credit control policy.  Take the time to write down all your procedures as it will payoff in the long run.

Credit control is the debt management function within companies.

Credit controllers can do some or all of the following:

Send out invoices – most companies now have this as an automated function however the credit controller is often still responsible for ensuring the whole process. They though send out copy invoice on a requested basis, this is often one of the tactic used by companies not to pay their invoices on time – by calling or waiting to be called and saying at that point they have not received any invoices, it is a common practice in UK businesses. Credit controllers are often the first point of contact when something goes wrong and consequently they deal with the credit notes, also getting legitimate credits done quickly helps to get the rest of the invoice paid as companies will refuse sometimes to an invoice if there is an out standing credit due.

Send out proof of delivery. POD’s as they are commonly referred to are another delaying tactic used by companies not to pay their invoice on time. Many companies routinely ask for POD’s for all their invoices, and they will do this just as the invoice is due for payment and it is then used as a reason not to pay due invoices.

Send out letters. Collection letters are one of the most common and cheapest form of debt collection. As well as being cheap there are also quite ineffective as most will put them directly into to bin. However this is part of the collection process that have to be run through if an account is going to end up going to the legal department or before it is outsourced to a debt collection agency. Copies of these letters have to be kept to prove in court the company has tried to collect and used all reasonable attempts.

Make telephone calls. Making credit control calls is one of the largest part of the job in credit control. Using the telephone to contact customers is expensive, not for the cost of the call, but for the time used. Telephone collection is best used at large problem accounts and main accounts. Often companies will have many telephone collectors, for example credit card companies who have bank of telephone operators calling customers to collect on unpaid debt.

Reconcile accounts. This often happens when a credit controller joins a company, they find that the accounts have not been allocated correctly and they have to reconcile whole accounts often going back a year or more – this finds invoice that have not been paid and discovers mis-allocations, which are common within the industry.

The above is just a sample of credit control duties, see the main site for a breakdown of the whole credit control function.

I worked in credit control, credit management and accountancy for many years and that is what has inspired me to write something that will help others in learning about that type of job and those currently in the profession.

Much has been written on the subject of credit control, and particularly the need to exercise control over the debtors.  For the small business owner this may be easier said than done.  Credit Control help may not be available, or may only be there on a part-time basis, and the credit control function may form only part of an employee’s job description. Then of course there is the level of expertise and knowledge that may be required to ensure settlement of debt is achieved. This may not have formed part of a general accounts clerk’s training.

Credit Controllers who are qualified by experience may be acceptable, but those qualified through formal training in the subject of credit control collections may adopt an entirely outlook.

What does this mean for the small business owner?

Indeed the business owner may also be the credit controller, perhaps a task undertaken through necessity rather than desire.

It is generally accepted that cash inflow into the business is critical, however, in some instances scant regard is given to ensuring the function is managed effectively.

There is of course a dilemma. In order to employ a professional credit controller to manage the cash collections, the operating costs of the business may increase. The benefit of such an appointment may then be outweighed by perhaps the additional salary costs such an employee would command.

How does the business owner overcome this problem?

Assuming that the employment of a full time credit controller is not justifiable, the first option is perhaps to send the existing staff on formal training courses.

The sending of an invoice or statement and the making of telephone calls chasing settlement of the debt are only part of the credit control process. It is important to remember other factors, perhaps less obvious, that impact upon the ability of the function to perform effectively. The business owner should support the credit controller and ensure help is available to improve areas of weakness within the business that may jeopardize cash collections.

A trained Credit Controller may be able to offer advice to improve the following areas that may be overlooked in a small business but are critical in ensuring cash is collected in a timely manner:

• Terms and Conditions of Sale.

Have they been agreed with the buyer? Are the payment terms clearly established? What process exists to accommodate the need to update the condition in today’s ever changing business world.

• Sales Order Processing.

Is there an established system of vetting all sales orders against the customer’s credit limits, ratings and payment history? Selling goods to slow payers will not only increase the risk of bad debts but also adversely impact cash flow.

• Invoicing.

Are sales invoices issued promptly? If not, then delays in payment may arise.

• Internal Quality Control Systems.

Does the business employ satisfactory quality control systems to ensure faulty product is not delivered to the customer? If not, the risk of goods being rejected, adverse cash flow and higher costs will be real. The work of the credit controller will become onerous with the raising and signing-off of credit notes being unwelcome.

• Customer Relations.

It is most desirable for all customer contact staff to build good relations with their counterparts. This is also an important aspect of the credit controller’s work. Whilst it is important to ensure all debts are cleared in a satisfactory manner, the adoption of a dogmatic and inflexible approach may harm long term relationships. The import of training staff in how to deal with customers cannot be underestimated.

• Proactive or Reactive Approach?

The business ethos should be one of maintaining contact with the customer throughout the period before debt settlement is due. This proactive approach will identify any impending problems and allow time for resolution before payment is due. All too often problems are not known until the settlement date has passed. It is not generally the practice for customers to inform the seller that they are not paying in accordance with agreements. The role of the credit controller should be pro-active, business orientated and one of building good relationships.