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How we can control in credit sales? and how we can get customer due amount?
1) Ensure sales staff are familiar with company’s credit policy.
2) Use a credit application form.
3) Make a credit check on each new customer (bank references –v/s- trade references v/s Management accounts). This can be a simple as downloading recent accounts from the Companies Registration Office
4) Obtain a personal guarantee from “doubtful” customers.
5) Set a “minimum order” level for credit sales. It is important to remember that there is a cost involved in setting up a credit account
6) Decide which customers will receive credit – credit is not an automatic entitlement.
7) Assess if you need credit insurance.
8) Set a credit limit for each new customer. (There are two aspects to consider your company’s exposure to bad debts and you credit control)
9) Conduct regular credit checks on your main customers.
10) Use fully documented Terms of Trade.
11) Ensure Terms of Trade include a Retention of Title Clause. Have this drafted by a solicitor familiar with your business.
12) Ensure your Terms of Trade allow you to charge interest on Late Payment. (See legislation on www.entemp.ie)
13) Ensure your Terms of Trade have procedures to deal with disputes.
14) Ensure your Terms of Trade specify Credit Terms. Best terms are 30 days from date of invoice – not 30 days from end of month.
15) Agree the payment terms in writing.
16) Give each customer a unique account number.
17) Confirm the following details:• Identify the company you are trading with.• Name of person within the company to contact over payment.• Contact address.• Phone/Fax/Mobile numbers/e-mail addresses.• Company VAT number.• Company registration number (if a limited company).
18) Record the date when payments are due.
19) Find out when your customers normally pay their bills. Do not be caught out by the old chestnut ‘our computer run is on….”
20) Specify the most appropriate payment method: cheque/electronic payment/credit.
Invoicing 21) Check the accuracy of all invoices sent out.
22) Include the following on all invoices:- Your bank details.- Terms and conditions of sale.- Name of the organisation you are trading with.- Address for payment.- Order number.- Order description.- Delivery date.- Unit price.- VAT number, amount and rate.- Total amount due.- Due date for payment.- Payment terms.- Discounts given.
23) Issue an invoice within 24 hours of delivery of the goods or services.
24) Check that your delivery is in line with the order to avoid invoice disputes.
25) Confirm receipt of invoice for large accounts.
26) Issue monthly Statements of account showing invoices paid and still outstanding.
Collection 27) Divide your customers into Good, Average and Bad, and set a Collection Policy for each category.
28) Properly allocate payments against specific unpaid invoices.
29) Phone 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.
30) Chase overdue payments within a week of them being due.
31) Conduct an aged debt analysis each week.
32) Prioritise your collection activity and chase the highest values first.
33) Levy a charge for “bounced cheques/direct debits”.
34) Use a set policy for further chasing, for example, standard letters, calls, faxes, visits referring to Solicitors or a Debt Collection Agency.
Recovery
35) Consider stop supplying when payment has not been made by a set time past the due date. Have a different stop policy for different categories of customers.
36) Put the matter in the hands of a Solicitor or Debt Collection Agency. Agencies: (www.intrum.ie, www.cashflowservices.com)
37) Pursue the claim through the Courts.
Management 38) Have documented procedures including timescales for handling and resolving disputes.
39) Establish a system for measuring the success of your credit control function. Establish “tight but attainable” targets. Best measurement is Days Sales Outstanding (D.S.O.)
40) Have a regular monthly review to identify problem accounts and define courses of action.
41) Have regular meetings with your sales team.
42) Ensure your staff are well trained eg: trained to prepare, listen, question, persuade and negotiate
In trading accounts, first we should assess the requirement correctly, normally the borrower has to keep a margin, the rest is given by the Bank as working capital loan.
the monthly stocks and book debts (not older than90 days or as may be different in diff sectors) are taken regularly to assess the drawing power for every month so that we can actually monitor/ control the credit at our end.
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