Healthy credit control is vital for any business selling on payment terms. But how effective is your credit control function? Are you reviewing the age of invoices owed to you and tracking how often customers are paying late? Consistently late payments are a sign of poor credit control, which can lead to poor cash flow and cause you to have insufficient funds to pay your workers, cover your bills or reinvest back into your growth. Even if you think your credit control is adequate because you have enough cash in the bank, what would be the impact if you got paid even just a few days quicker? 

With Xero tech integration, you can have seamless and efficient credit control and improve the wellbeing of your business. 

Assess your current credit control policies

Your credit control policies will determine both who you extend credit to and the terms you have in place for receiving payment. When looking to improve your credit control, the first step is understanding your current position. Ask yourself: 

  • What are my current payment terms? 
  • How often are invoices being paid on time and how often are they being paid late? 
  • When invoices are paid late, how long does it take to receive payment? 

Data based on millions of UK invoices sent via Xero shows that small business owners receive payments on average five to eight days late depending on the length of their payment terms. Do you commonly have payments coming in later than this? Do you have more invoices being paid late than on time? If so, then it’s time to adjust your credit control policies. 


Have clear payment terms and solid record keeping 

The next step to quality credit control is making sure your customers understand your terms. Your payment terms will include things like: 

  • How long after purchase payments are due – seven days, 30 days, etc. 
  • Any interest or late fees that will be charged for late payments 
  • Your policy for sending out reminders and chasing late payments 

Clear payment terms mean your customers have all the information they need to pay you on time. There are also things you can do on your end to minimise the risk of late payments, such as sending out prompt invoices. We recommend having a defined time frame for when invoices are sent out after a purchase as well as scheduled reminders both prior to and following the due date. 

It’s also important to track clients that regularly miss payments or need to be chased. By analysing your accounts, you’ll likely find that certain customers are regularly paying late or require more reminders than others. What you do with this information is up to you: you may decide to adjust your policies for these customers so they only receive small amounts of credit at a time or send out more frequent reminders to them. You may also decide it’s in the best interest of your business to no longer extend credit to them at all.  


Use tech to automate credit control 

Chasing payments can be difficult. It can feel awkward to send out reminders or charge late fees especially if you have positive relationships with your clients. But it doesn’t have to be this way. Xero has several tools and apps that help you automate invoice chasing to save you time and stress. 

There are many great options for invoice chasing on Xero, including an invoice reminder function and integrated debtor tracking apps you can view on the Xero App Marketplace, but our specific recommendation will depend on you, your business, and your unique needs.

There is no one size fits all solution for good credit control, but getting cash into the business as quickly as possible is essential for every business. At Tyrrell Accountants, we offer a Xero Optimisation Review to help you go from simply using Xero to leveraging it to propel your business forward. By looking at your finance function effectiveness, including how you receive and chase payments,  and analysing your unique industry type, needs and ambitions, we’ll create a roadmap to show you exactly what tools and apps you can use to make running your business more efficient, effective and easy.

Find out more and schedule your Xero Optimisation Review here.