Credit Control is a crucial process within any business, but within the hire sector, where levels of investment are higher than most industries, it becomes even more important. Cash is often tied up in fixed assets, and the management of cash inflow is vital for the liquidity of the business.
The problem that arises for a lot of hire sector businesses that are struggling with their credit control is their inability to dedicate the required amount of time to their credit management. As this only takes a couple of hours a day, it may seem like a waste of money to employ someone solely for this task but it can prove worthwhile, one solution some companies find, is to outsource their credit control.
The factors that lead to poor credit can be varied, although a high number of debtor days are often the issue in the independent hire industry. It is essential to reduce this to as lower number as possible. Other tips for staying on top of your debtor days include:
• Keeping a record of every transaction between yourselves and your debtors.
• Chasing larger debts first, followed by older debts, and then chasing the ones you assume there may be problems with.
• Calling the customer just before the payment is due to ensure it is going to be on time – if it isn’t, then you can start planning.
If debtors do not pay on time then this creates poor cash flow. Paying creditors can be a very stringent process in an industry where businesses are so often cash constrained, and late payment has the potential to send a business into bankruptcy.
If you manage to reduce debtor days and have more cash within the business, then paying your debts will become a smoother transaction which can save you paying interest on any late payments. Not only this, but it will also improve the business processes, which can increase efficiency for everyone. Client and supplier relationships will be stronger, with regular communication and if all parties receive payment on time, then everybody is happier. Dedicating time, an employee or even outsourcing your credit control is something every business should consider.
Sollertia was established in 2004 to allow SME’s to benefit from cost effective adaptable outsourcing of their accounting and finance requirements, at a fraction of the cost to hiring dedicated in-house staff. Massive investment in contemporary IT, bespoke software, online web ware and superb accountancy professionals has allowed Sollertia’s clients to benefit from having a completely outsourced accounting / finance department service – which cuts their accountancy costs by up to 50%.
Our services include:
Cashflow Management Financial Director Consultancy
Outsourced Credit Control Outsourced Payroll
Management Accounting Business Benchmarking
Outsourced Bookkeeping Tax Compliance Services
Sollertia are registered Member in Practice (MiP) with the Chartered Institute of Management Accountants (CIMA)