How to avoid having to be a psychic credit controller

How do credit controllers keep things running?  How do they control the risk to the company?


quarter one insolovency for uk


Companies ceasing trading

With new government statics in for the first quarter of 2016 the trend for companies ceasing trading does not seem to abating.  Government figures show 3,694 companies entered insolvency in the first three months of the year, 3.6pc lower than in the same period during 2015.



new companies

Companies starting up

Couple that with new company start ups, there are well known statistics that show that at least half of all start up businesses fail within their first 5 years, this coupled with the fact that some of these now also restart new companies, sometimes pre-empting the fail of the currently trading company and this compounds the job of the credit controller.



Controlling the risk

Trying to control the exposure and risk of a company these days falls onto the already stressed accounts department of the company.  It seems that the credit controller now also needs to be a psychic and have abilities of fortune telling!


Cash flow forecasts demand that the credit controller be ahead of the game where finance is concerned and at the tip of their fingers know what cash is due in at any point.  If they only had to deal with expected payment dates as agreed on contract starts, that would be easy, however they are constantly now playing catch up with customers finding more and more convoluted ways of avoiding payments.

Mitigating the challenge

There are several ways of mitigating the challenge of non and defaulting payments, firstly, the most important of all, for cash sale customers/non account customers ask for a deposit with order as this will cover the basic expenses outlay and then insist on full payment before or on delivery of cleared funds.  Cleared funds are very important, as some payment options require 3 to 5 days to get through the banking system.  If a customer wants to pay on the day, cash or fast payment into the bank or credit card are  the only options that should be considered.  If there is time, the BACS/CHAPS or cheques can be considered.

Credit card payments need thought as if a deposit is taken by card and then another payment type is received for the balance, should the customer complain or reject the goods upto 6 months after delivery, they can have a FULL refund from the credit card company.  This is given to them first on complaint and then you have to fight to overturn the decision.

Customers and credit accounts

For customer having or wanting credit accounts, there are a few rules that must be followed.  Never overextend the company by offering credit to any one customer that is more than 20% of your overall yearly sales.  If this customer should default in payment for any reason, the impact on your business would be catastrophic.  Next, you must credit check every customer to determine the credit worthiness of their company.  Never extend more credit than it says on the report and never more than you can afford to lose, should the worst happen, but these will need to be monitored regularly as things can change on a day to day basis.  If you have enough in your budget to allow, having debt insurance is definitely the way to go.  This works on a company to company basis (not private indivuals) and the insurance company not only monitor the risk of the company for you, but they also step in to chase doubtful debts and best of all – pay out when the company defaults!

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