Credit control is important in a business especially for small businesses. This means that every small business should ensure that it collects its outstanding invoices. Some small businesses in the UK let their uncollected invoices accumulate which ultimately affects their cash flow and also the performance of the general business. This problem can be attributed to poor credit control and lack of knowledge on the benefits of good credit control procedures in a small business.
One of the primary benefits of good credit procedures in a small business is that there will be sufficient funds to ensure that the business runs smoothly. The outstanding uncollected invoices mean that the business has some money which is deemed to be available but cannot be used in the operations of the business. This is especially a major issue in a small business which might not have enough funds to run the various operations without collecting the outstanding invoices as required. This makes it paramount for a business to ensure that it has set down good procedures of credit control so as to ensure the business runs smoothly with sufficient funds available.
Having good procedures is also important since it enables the business to know its reliable and trustworthy clients. This is because having good procedures in place will enable the business to explain to its various clients when and how the invoices will be collected. The reliable clients will keep to the payment terms and will ensure that the invoices are ready by the time stipulated by the credit control procedure. Through this the business can identify the clients that keep to their payment terms and therefore it becomes easier to extend credit to such clients since they keep their word.
Another major benefit of having a good credit control procedure in place is that the businesses are able to plan properly. This is because a small business with good control procedures will be able to know the money it has and the money to expect. As a result, the business will be able to budget even on the uncollected invoices since the laid down procedure will ensure that the outstanding invoices are collected on time. A business can even get outsourced providers of credit control services who will ensure that all the outstanding invoices are collected on time. Having outsourced providers will give the business time to concentrate on other issues regarding the growth of the business. Furthermore, some outsourced providers even pay for the uncollected invoices and then go ahead to collect the invoices after the stipulated dates. This gives the small business the assurance that funds will be available on time to run the various operations of the business.
Good credit control procedures that enhance collection of a businesses outstanding invoices are also beneficial because it allows a business to control credit limits. Small businesses in the UK should have a limit of the credit to be extended. This means that these businesses should have a limit of the outstanding invoices. When the outstanding invoices surpass the set limit, the business might not be able to extend credit to other clients. But with good credit control procedures the small businesses will be able to set limits and therefore be able to extend credit to other customers and also to those whose outstanding invoices have been collected. Therefore, it is paramount for a small business to have good credit control procedures in place which will enhance their collection of outstanding invoices.