Where’s my money? – a Credit Control problem

That’s the question I often hear when I am providing business advice to micro businesses. Owners of these businesses (1-4 employees as defined by the Business Growth service) are often hampered by lack of internal resource due to their small size, especially when they are growing rapidly. Frequently, hard pressed owners are desperately multi-tasking: handling marketing, administration, book keeping, as well as delivering their core service or product. All too often, credit control is neglected.

A revealing survey on Credit Control

A YouGov poll of 500 micro-business owners, commissioned by FreeAgent (an accounting software provider) established that approximately one third of these owners wait at least four weeks after an invoice falls due, before they chase the debt. In FreeAgent’s view, if overdue invoices are not chased quickly, customers may often not recognise the need to pay their bills promptly. Indeed, the poll revealed that 1 in 8 of these business owners ended up having to wait at least a year to have their invoices paid!

The consequences of Credit Control failure

The consequences of this control failure can be dire, especially when a business is growing rapidly. Cash flow is often stressed in a growth situation, when heavy expenditure is being incurred on plant and equipment, IT infrastructure, stock build, as well as recruiting and training new, inexperienced staff. This can be exacerbated if the cash inflow from debtors starts to slow to a trickle, and even dry up completely.

Procedures are needed

Sure, invoice finance can help, if appropriate, but it’s no substitute for an effective system of credit control. When I’m providing business planning support and business advice to my micro clients, I always make sure we carve out some time to focus on this vital area. There are a number of simple procedures that they can put in place to ease the potential stress of credit control and take the pain away if these micro businesses have to sell on credit.

Consider Outsourcing

If my clients are still challenged by the time involved in these procedures, we always consider outsourcing together. There are effective, reasonably priced, specialists who can take this pain away from my clients, so they can focus on growing their businesses.

Take the pain away!

By applying the right procedures on a consistent basis, micro business owners can begin to see a positive effect. As a business advisor, who has faced these kinds of issues during my 20 years in industry, I know how stressful cash flow issues can be. If you are facing these kinds of challenges, feel free to get in touch for a chat on 0777 454 8822.

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