If you’re a small business, you might believe that credit control is something that you’ll do once you’ve grown.
This might be because you assume it’s only relevant once your turnover increases and the value of your invoices increases, you’re hiring more staff, and cash flow becomes complex.
The reality is, the smaller you are, the more important it is for you to have a structured credit control process.
Not having a process or having a weak process doesn’t just delay payment; it impacts cash flow and increases the operational risk so much so that, as a small business, you become reactive to chasing payment.
Having a strong credit control process ensures that you have a level of financial control.
Cash flow is the lifeblood of your business
It doesn’t matter if you invoice £100 or £100,000; if money isn’t coming in on time, your business falters.
As a small business, you likely:
- Operate with tighter margins
- Worry that late payment will impact payment to staff, suppliers and your ability to grow
- Use your own funds to prop up your business.
Having a proper credit control process ensures cash flow is somewhat predictable.
Late Payments Hit Small Businesses Hardest
While large businesses suffer from late payment, it’s smaller businesses that late payment impacts the most, as they are unable to absorb delays.
Not implementing a proper credit control process means that:
- Invoices go out late
- Reminders rely on memory
- Overdue accounts slip through the cracks
- Disputes remain unresolved
- Escalation never happens
Credit control isn’t glamorous, but it removes the reliance on you as an owner and replaces it with a consistent process.
Professionalism Builds Trust and Faster Payment
A clear and structured credit control process signals that you take your business seriously and signals:
- That you’re competent
- Organised
- Accountable
- Expect to be paid on time
Regardless of the size of your business, setting up a process like you’re bigger than you are signals intent and becomes part of your business’s identity.
A Process Protects Relationships
Business owners might avoid chasing debts, fearing that it might damage future relationships, but having a credit control process will aid in avoiding this by:
- Ensuring that you don’t get emotional and use neutral language that stays factual
- Sets expectations from the offset
- Escalating politely and consistently, not just when you have the time.
A client worth continuing a relationship with will respect the clarity that your structured credit control process gives.
Disputes Are Easier to Resolve When the Process Is Clear
Whether it’s a genuine dispute or not, a credit control process will help you resolve them promptly, especially if you are recording disputes and learning from them.
More often than not, disputes will arise from:
- Missing a PO number
- Incorrect line items on an invoice
- Misscommunication
- Approval delays.
A proper process ensures:
- Accurate invoices
- Documented communication
- Logged follow‑ups
- Clear ownership
You Can’t Improve What You Don’t Measure
Successful businesses know what is working and what isn’t, and without a credit control process, there is no way that you will know what is working with your invoicing and collection process.
Things that a good credit control process will tell you include:
- Knowing the average number of days to pay
- Aged debt trends
- High-risk clients
- Bottlenecks in your workflow.
A Process Scales With You
In reading up to this point, you probably realise that having a credit control process isn’t something that you should wait to implement when your business has grown; having one can help your business grow.
Even a simple process can help, and as you grow, this can be adapted to suit your business needs.
Conclusion
Having a credit control process is a necessity, not a luxury reserved for bigger businesses. They are something that can start simply and grow with your business, and what they shouldn’t be is a reaction to when you have a problem with a late payer.
Its core function is to protect your revenue and assist in strengthening those relations. Done right, it also helps create financial stability in your business.
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