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Eight New Year’s Resolutions to Improve your Commercial Credit Management in 2020

2020 resolutions

2020 could be the year for your business to improve and grow, however this relies heavily on how effectively your commercial credit management runs. Therefore, at CMG UK, we have compiled a list of New Year’s resolutions for your to carry forward into 2020 for the benefit of your business.

Improving your commercial credit management in 2020

1. Start as you mean to go on

Put a detailed strategy in place for your commercial credit management before Christmas so you can hit the ground running when you return for the New Year. Your strategy should incorporate the entire order to cash process and should have buy-in from all departments.

By doing this you will make your subsequent year a lot simpler, as having an effective strategy from the moment you acquire a new client to the time you are paid will significantly reduce the number of issues and disputes that could occur; therefore you will be paid quicker.

2. Incorporate more telephone conversations

I am a huge advocate of telephone conversations between the credit management department and customers. Stronger business relationships can be built within these phone calls which is extremely beneficial when collecting payment.

These calls don’t necessarily need to happen with all customers, you could instead target those that are difficult to get in touch with or are higher risk; I have found that there is a higher success rate by doing this rather than solely emailing.

3. Work with the sales team

Sales and credit control are the two main customer facing roles within a business and subsequently both departments should work closely together to ensure the best possible outcome in regards to a customer.

From my experience, by having sales and credit control in regular communication with each other, a stronger business relationship is formed with customers. Therefore any issues that arise can be dealt with much more quickly, than if credit control is unaware of the previous contact a customer has had with the sales team.  Some customers will play sales off against credit control so showing a customer a united front will reduce delayed payment using these tactics. Ideally visits to key accounts should be attended by both sales and credit control. Not to get payment but to overcome any obstacles that causes delays in payment.

4. Prioritise

To ensure you get the maximum amount of money from your chasing you should prioritise which invoices you chase first. The highest value invoices should be chased first, preferably with a phone call initially, for the simple fact that you will receive more money for your one call than if you prioritise lower value invoices.

Smaller value invoices should be placed into an email cycle, however, if after two emails you have not received a response I would highly recommend you begin chaser calls. This is especially vital if your client has gone over their payment terms; at this point you should consider also begin sending collection letters as they often carry more weight  than emails alone, as emails are considered an informal form of communication and letters a very formal way of communicating. Scanning and attaching a letter to an email stating the original is being posted to your customer will ensure the letter still carries the weight desired but also ensures that the letter will be read more quickly.

5. Categorise your customers

A very similar tactic to prioritising invoices, you should also categorise your customers in relation to their risk and customer type, high risk and low risk customers. Customers that you deem to be high risk or that tend to have excuses for non-payment should be chased at the first instance. These are the customers that you need to continually chase; don’t let them forget that they owe you payment.

Different customer types require different collection strategies, for example if some of your customers are local government authorities; whist there is little risk associated with these customers there is usually considerable bureaucracy to get a an invoice paid. Conversely, if your customer is a small business your contact will often be the person who has the authority to pay or delay payment of your invoices.

All new customers should be deemed high risk until they have a payment history with you. Low risk customers, that have a good payment history with your company, should be placed into an email cycle or letter cycle.

6. Check the credit risk of potential customers

One of the biggest mistakes a company can make is not credit checking their customers before carrying out work. It is all well and good receiving business, but does your customer have the ability to pay? Monitoring your customer’s financial status can also be extremely beneficial to you, so that you can be immediately informed if a situation changes.

To save the time and money that comes with carrying out credit risk reporting and monitoring, you may find it more cost effective to invest in credit management support. You can sign up for our support service for as little as £50 per month and receive unlimited credit risk reporting and monitoring, but also take advantage of the many other benefits included in the package, such as free access to our online toolkit.

7. Report your progress

Reporting you collection activity, such as debtor days, along with other measurements or projections reports, not only evidences your hard work, but also areas that can be improved upon. This can be within your own department, or it can potentially identify an issue within the order to cash process, such as delivery or quality issues that need input from other departments in the business in order for them to be rectified.

8. Ask for help if necessary

It can be extremely beneficial to businesses, large and small alike, to seek support or guidance when areas within the credit management function experiences issues. Using one of our services has proven to be extremely beneficial for our past and current clients and can dramatically improve your cash flow and debtor days.

Take a look at how we have helped our clients or get in touch today for recommendations of which service would ideally suit your business.