Does my business need a credit control department?

Many businesses will reach a point in their evolution when they decide to specialise different aspects in order to bring expertise into the company and reduce the burden on the owner and other staff members.

Whether it’s sales, marketing, IT or recruitment, there are a number of jobs that can benefit massively from having specialist resource and knowledge.

Credit control is no different. With late payment causing so much concern for businesses, a huge proportion of those without a dedicated credit control department will have been considering whether they need to introduce one – and those with one already in place will have thought about the merits of increasing its size.

Unfortunately, there’s no magic number in terms of turnover or headcount that determines whether a business should have a credit control department. So how do you know when that time comes?

Here are five things to consider to help you make your decision.

1. How promptly is my business being paid?

On the surface this looks like to the most important consideration. If you find that your existing processes aren’t working and customers are regularly paying beyond agreed terms – or not at all – and you’re often using debt collection agencies or the courts to recover what you’re owed, this is simply unsustainable.

Every business relies on a healthy cash flow to operate and even exist, so it’s important that you are getting paid on time.

2. How much time am I spending on credit control?

Even if your business is being paid promptly by customers, there are other factors to consider. For instance, how much time are you having to spend on credit control?

There are only so many hours in a day, and any time you spend chasing customers for payment or doing basic credit control admin jobs is time that’s not being spent seeking new customers, networking or identifying new growth opportunities. Often, the single biggest factor behind a business introducing a credit control department is to free up more time to grow the business.

3. Do I know what I’m doing?

We’ll let you in on a little secret: not every business owner knows everything there is about running a business. And it’s ok! That’s why bigger businesses have large management structures and departments in place, so owners can surround themselves with knowledge and expertise.

Credit control isn’t easy. There’s a lot to do and consider – not to mention best practice – while there’s also plenty of legislation to take into account. How well do you know the legal system, for example, which is so complex but can be so beneficial when a customer doesn’t pay?

If you find that you’re sort of making it up as you go along, it might be time to hire a specialist.

4. How many of the basics are you doing?

We mentioned best practice in our previous consideration, and it’s certainly an important point. When it comes to credit control there is a never-ending list of tricks and tips you could implement in order to improve results. 

For instance, are you calling customers to check receipt and the accuracy of invoices, which can play a huge role in reducing disputes?  Are you putting in a courtesy call a few days before the invoice is due? And how quickly are you acting when an invoice exceeds terms?

These are all important stages of the credit control process, but they take time and expertise to get right. 

5. Do I know what my sales ledger looks like?

Everyone who’s responsible for their credit control should keep a keen eye on the business’s sales ledger. It’s important to always be aware of which invoices need prioritising to minimise late payment, but maintaining it can be a dull and time-consuming job.

If you aren’t regularly reviewing it or are spending too much time on it, maybe it’s time to consider hiring someone that can.