Q . I AM a small business owner and in the current economic climate I feel it is vital that I maintain strong credit control. Can you please provide me with any recommendations you may have in terms of implementing stronger credit control? A . The importance of strong credit control cannot be overlooked. In these difficult commercial times making sales and protecting revenue is essential to the very survival of any business. Cash flow is the very lifeblood of a business and each business should consider whether it is doing everything it can to ensure that its customers are paying on time. The key to getting paid on time is having an effective credit management policy in place within your business. This policy should allow for the early identification of potential bad debts and prescribe actions in relation to same. Most effective credit management policies can be broken down into three stages. These are the order stage, invoicing stage and collection stage. It is important that all three of these stages are managed effectively. At the order stage, it is important to ensure sales staff are familiar with company's credit policy and that credit checks are carried out on each new customer. Decisions must then be made as to which customers will receive credit and the limit of credit to be offered, remember credit is not an automatic entitlement. At this stage, it is also crucial that fully documented Terms of Trade are put in place and to ensure these Terms of Trade include a Retention of Title Clause and have procedures to deal with potential disputes. It is also very important to agree payments times in writing and specify the most appropriate payment method: cheque/electronic payment/credit. The invoicing stage is also of utmost importance to any credit control policy. During this phase, it is imperative to check the accuracy of all invoices sent out, that all deliveries are in line with orders and to ensure all invoices include the due date for payment. Where possible it is also advisable that all invoices issue within 24 hours of delivery of the goods or services and that the receipt of each invoice is confirmed with all large customers. Some productive steps at the collection phase might include dividing your customers into Good, Average and Bad, and setting a collection policy for each category. It is also advisable to contact major accounts before the due date of payment to ensure there are no disputes and that the way is clear for payment to be made on time. Overdue payments should be chased within a week of them being due. Also an aged debt analysis should be conducted each week, while at the same time prioritising your collection activity to chase the highest unpaid invoices first. Consideration should also be given to stopping supply when payment has not been made and as to what legal steps are available when payment is not forthcoming. Finally, it is important that a system to measure the success of the credit control policy is established. The above recommendations will no doubt aid effective Credit Control. Whilst by no means exhaustive, it is hoped they will help you to re-examine your own company's procedures and practices and identify any deficiencies that may exist. Jim Doyle ACMA QFA is a partner in RDA Accountants offering full accountancy, business advisory, tax advisory and financial services. RDA Accountants | 5 Upper George Street, Wexford | Louisville House, Waterford Road, Kilkenny | 053 91 70507 | www.rda.ie RDA Wealth Ltd trading as RDA Accountants is regulated by the Central Bank of Ireland