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Effective credit control: Get paid promptly whilst retaining relationships

Gavin Fisher, member of the Chartered Institute of Credit Management and Service Manager at Sterling Credit Management, offers advice on how to get paid without ruining your relationship with the customer.

13th Oct 2020
Head of Outsourced Services Sterling Outsourcing
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Now, more than ever, accountancy firms are finding that effective management of their sales ledger is vital to healthy cashflow. But with many of their clients struggling in difficult trading conditions, payments are being delayed.

Firms who had taken a casual approach to their cash collection prior to Covid are seeing their outstanding debt increasing as new billing accumulates on top of ageing debt. Getting paid whilst maintaining customer relationships has always been a difficult balance for accountants, the additional financial pressures relating to Covid has accentuated the problem.

Regular and consistent communication avoids conflict

It’s common for firms not to chase invoices until they are well overdue either due to lack of time or in the belief that chasing payment early is overzealous or discourteous.

As well as the obvious effect on cashflow, this tends to have a damaging effect on customer relations. The invoice is already well overdue when they finally call the client, so the firm expects prompt payment. The client, however, sees that the matter has just been brought to their attention, their tendency will be to treat the matter with the same urgency as a new liability.

They may claim to have a query, not to have received the invoice, or to have cashflow problems. This gap can lead to resentment on each side which can escalate quickly as the firm demands payment.

Customers should be contacted regularly and consistently to maintain communication and expectations. Ideally a call should be made to the client prior to due date. By contacting at this point you are not chasing payment but making a courtesy call, the invoice is not past due so it is a different type of conversation. Calling early sets expectations and removes barriers to payment, moving the entire cycle forward. If payment is not forthcoming then a gentle reminder just after due date (or promised payment date) should be made.

Regular and consistent communication helps maintain the relationship and ensures your invoice is a priority for payment rather than sitting on the bottom of the pile, it also shows your business has a professional credit control process in place. Adopting a defined, documented dunning process with escalating reminder emails, calls and letters helps to maintain a consistent approach.

If any disputes are raised, it’s important to resolve them quickly to maintain customer service and achieve payment. The longer a query is left, the more difficult it is to resolve, and the more likely it will impact on the relationship.

Don’t rely solely on emails

Whilst standard emails and letters do have their place in the chase process, they are easily ignored. Phone calls are essential for positive rapport, mutual understanding, and gaining commitment. It’s easy to misinterpret the tone of an email, which can either lead to conflict, or delay payment further.

There should always be objectives to be met for each call, whether it is taking immediate payment, commitment to a payment date or payment schedule or at minimum agreeing to an action which helps to remove a barrier to payment. An email should then be sent confirming the points agreed to. This serves as a record of the call and will motivate the client to do what they agreed to do.

Let someone else do the chasing!

Even in large firms it’s common for partners to take responsibility for calling clients to discuss unpaid fees. They may insist on making the calls themselves even when the firm has a credit controller in place. This is often due to the misconception that should anyone else make that call it would damage the relationship. In reality this usually means a badly managed ledger, with the partner retaining relations by allowing clients to build up ageing debt, and falling out with clients once patience is lost.

Given its importance to the success of the business the credit control role should be assigned to an individual in the firm with the right skills, inclination, and time to manage the work effectively.

For a small firm this may be part time, but the credit controller should have hours dedicated to the task and the work should not be shared amongst multiple staff. The role is often assigned to bookkeepers or receptionists with no training, confidence or desire to do the work, so they focus their attention on other tasks.

There is an art to making effective credit control calls, with the skills required being more closely related to sales and customer service. Securing payment whilst retaining the relationship needs a confident and enthusiastic approach, particularly when dealing with company directors, owners and high net worth individuals.

A well trained, experienced part-time credit controller can be employed for the equivalent charge out rate of a bookkeeper. Alternatively, and for the same cost, a managed outsourced service from specialists such as Sterling Credit Management gives all the benefits of an accomplished full-time credit control department.

 

Sterling have been providing outsourced credit control to accountancy firms for over 10 years, managing sales ledgers for firms ranging from £1m to £20m turnover. The service works entirely under each firm’s brand, remotely on their systems, so the outsourcing is invisible to customers and stakeholders. The average reduction in debtor days for accountancy firms is 35%, with all reporting a significant improvement in customer relations.

 

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