Effective Credit Control: Managing Financial Risk and Cash Flow
What is Credit Control?
Credit Control is the practice of managing and monitoring a company's cash flow by ensuring that customers pay their outstanding invoices on time. It involves establishing credit policies, setting payment terms, and following up on overdue accounts. Effective credit control is crucial for any business that wants to maintain a healthy cash flow and avoid bad debt.
Why is Credit Control important?
Credit Control is an essential part of managing a business's finances. By implementing effective credit control policies, a business can minimize the risk of bad debt, improve cash flow, and maintain a healthy balance sheet. Without proper credit control measures in place, a business may struggle to meet its financial obligations and may even become insolvent.
How does Credit Control work?
Credit Control typically involves several steps, including assessing a customer's creditworthiness before granting credit, setting payment terms and credit limits, and monitoring customer accounts for overdue payments. It may also involve following up on overdue accounts with reminders, phone calls, or collection agencies. By taking a proactive approach to credit control, businesses can avoid the risk of bad debt and maintain a healthy cash flow.