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It’s time for your credit control to catch up: Part 4, credit control meetings
Brad Ewin from Chaser breaks down why your business needs to be having regular credit control meetings, and how to run them for maximum efficiency.
This is the fourth in a series of six articles on credit control best practice. You can read the other articles here.
We all know how widespread the late payment problem is. What’s shocking is Zurich’s discovery that 41% of SMEs have experienced significant cash flow problems as a result of it. And cash flow problems are nothing to be sneezed at. The FSB’s 2016 report into late payment identified that 50,000 UK businesses that went under in 2014 could have been saved were it not for late payment problems.
The late payment problem is not just something you can just “be aware of” anymore - you need to be protecting yourself. Right now. And effective credit control is the answer.
Critical to every modern credit control function are credit control meetings. Without regular credit control meetings in place, critical cash flow problems can easily remain undiscovered and/or unactioned, sabotaging your business. There are five key elements that make up effective and efficient credit control meetings. Let’s break them down.
1) Bank reconciliation
Do this the morning of the meeting. It ensures everyone’s working off the most accurate and up-to-date information possible when you convene.
2) Take your agenda seriously
If your finance team is just treating these as a formality, a box to tick, that behaviour needs to change. Good agendas are circulated at least one hour prior to the meeting so everyone has time to digest it and come prepared. To tell the complete story of you, your customers, and your cash flow, they need to include:
- The problem invoices for discussion (highlighting the longest overdue and largest overdue)
- Complete comms histories of these invoices (something covered in detail in last week’s Part 3)
- The past payment trends of the customers in question
Just try and keep the agenda as tight and as selective as possible - 31 hours are spent in unproductive meetings every month.
3) Look outside the finance team
Coming out of this meeting, one way or another there are going to be customers to chase up. It can be a tough balance being firm enough to get paid and treading lightly to preserve the relationship.
If you have sales people or account managers, for instance, consider bringing them into a meeting discussing one of their customers. Their input can be valuable and they can be an excellent person to escalate chasing after the meeting.
Don’t forget to consider their point of view - commission-based motivation and covering off their customer first so they can leave the meeting both go a long way.
4) Concrete next actions
End your meeting with the summary of next actions read aloud. This ensures everyone knows what they need to do next, and gives them the opportunity to raise questions or concerns. Keep this momentum up by immediately sending an email copy of next actions after the meeting closes.
5) Every one to two weeks
This is how often you should be holding these meetings. Any more frequent and there’s simply not enough change to warrant taking the time. Any less frequent and you leave your cash flow vulnerable to unchecked problems. Experiment with the one-to-two-week range and see first-hand what’s best for your business.
Next week gets into how to deal with bad-paying customers - from having standardised processes to catch problem invoices, through to adapting to prevent recurrence, as well as the importance of relaying bad-payment to the rest of your business. Stay tuned for Part 5: Clearing out the cobwebs.