How to Set Up an Effective Credit Control Process

As a business owner, you’re probably no stranger to the importance of cash flow. But even with the best intentions, getting clients to pay on time can be a challenge. That’s where having an effective credit control process comes into play—it’s what keeps your finances healthy and ensures you’re not constantly chasing overdue invoices. Let me walk you through how to set up a solid credit control system that works for your business.

And remember, if you ever need a bit of extra support, McQueen Partnership offers services like Credit Control, Debt Recovery, and Credit Control Consultation to help keep your finances on track.

How to Create a Credit Control Policy

Let’s start with the foundation—your credit control policy. Think of it as the framework that dictates how you deal with payments from customers. Having this in place makes everything else much easier to manage.

First, set clear payment terms. Decide how long clients have to pay their invoices—whether it’s 30 days, 60 days, or something else that works for your business. Make sure these terms are communicated to clients before you even begin the work. That way, there’s no confusion when it comes time to invoice them.

Next, establish credit limits. Not every customer is going to have the same payment history, so it’s a good idea to assess their creditworthiness. Setting a credit limit for each client helps protect your business from taking on unnecessary risk. For example, a new or less reliable client might get a smaller credit limit than a long-standing one with a perfect payment record.

Lastly, review accounts regularly. This might sound obvious, but it’s crucial to stay on top of who owes what and when. By monitoring accounts regularly, you can catch potential issues early and address them before they become bigger problems.

The Four Elements of Good Credit Control

Now that you’ve got your policy in place, let’s talk about the core elements of effective credit control. There are four key areas you need to focus on:

1. Clear Credit Terms We touched on this earlier, but it’s worth repeating—having clear credit terms is essential. Not only does it set expectations upfront, but it also gives you a reference point if payments are delayed. Make sure these terms are included in every contract and invoice so there’s no room for misunderstanding.

2. Accurate and Timely Invoicing Invoices are your first line of defense when it comes to cash flow. If your invoices are sent out late or have errors, it delays the payment process and gives clients an excuse to hold off. Make sure invoices are sent as soon as the work is done, and double-check them for accuracy before they go out.

3. Consistent Follow-Up Chasing payments isn’t anyone’s favourite task, but it’s an essential part of credit control. Make sure you’re following up with clients before the payment is due—this can be a friendly reminder—and again immediately after it’s overdue. Consistent follow-up shows clients that you take payments seriously and that late payments won’t be ignored.

4. Taking Action on Overdue Payments Even with the best processes in place, some clients will still pay late. The key is knowing when and how to take action. Start by issuing reminders, but don’t be afraid to escalate the situation if necessary. Whether it’s adding late payment fees, pausing work for clients with overdue balances, or even bringing in a professional debt recovery service like McQueen Partnership, it’s important to have a plan for how to handle overdue invoices.

What Makes a Successful Credit Controller?

Behind every good credit control process is a skilled credit controller. So, what makes a credit controller successful? There are a few qualities that stand out.

Attention to Detail A successful credit controller needs to be incredibly detail-oriented. They’re responsible for keeping track of multiple accounts, payments, and invoices, and any small mistake can cause big delays. Having an eye for detail ensures everything runs smoothly.

Strong Communication Skills Chasing payments isn’t always easy, but good communication makes all the difference. A skilled credit controller knows how to strike the right balance between being firm and maintaining a good client relationship. It’s about being assertive without damaging the business connection.

Organised and Proactive A credit controller needs to be highly organised, especially when managing multiple accounts at different stages of payment. Being proactive is key—anticipating problems before they arise and staying on top of overdue accounts before they become a bigger issue.

Problem-Solving Abilities Not every payment issue is straightforward. Sometimes, clients might have genuine reasons for late payment, and a good credit controller should be able to navigate these challenges. Whether it’s negotiating a payment plan or offering a solution that benefits both parties, being a strong problem solver is a valuable skill.

If you're finding that managing credit control is taking up too much of your time, McQueen Partnership offers professional services to handle the process for you, ensuring that everything runs smoothly without the stress.

Pulling It All Together

Setting up an effective credit control process doesn’t have to be overly complicated, but it does require some planning. Here’s a quick recap:

• Create a clear credit control policy that includes payment terms, credit limits, and regular account reviews.
• Focus on the four key elements of credit control: clear terms, accurate invoicing, consistent follow-up, and taking action on overdue payments.
• Ensure you have a skilled credit controller (or credit control team) who is detail-oriented, organised, and strong in communication and problem-solving.

Once these systems are in place, you’ll notice that managing payments becomes a lot less stressful. And if you ever need help fine-tuning your processes or want to hand over some of the responsibility, McQueen Partnership offers Credit Control, Debt Recovery, and Credit Control Consultation services to make sure your business stays on top of its cash flow.