Using Technology for Better Credit Management
Harnessing technology to better your business is vital for survival in the current climate. Being more efficient with resources and time is what will separate good business practices from great. Robotic Process Automation (RPA), Artificial Intelligence (AI), Blockchain and Machine Learning are all technologies that are rapidly becoming part of everyday life for the modern business.
A healthy cash flow is one of the most fundamental components of running a business and it needs to be a priority for all business leaders. The good news is that Improving cash flow can often start internally by implementing better credit control processes which will likely be less complicated than increasing prices and quicker than entering new markets.
In 2021 we’re able to leverage the incredible technology at our fingertips through tools, apps and platforms to tighten our credit management, help us operate more efficiently and do more in less time with less resources.
Effective credit management
Effective credit management will ensure you have enough cash coming in when you’re supposed to so that all your outgoings are covered, in other words it results in healthy cash flow.
A business with a healthy cash flow will be more flexible in times of slow revenue. They’ll be able to invest in areas to better serve their customers with investment in better POS systems or logistics and can invest in new products or enter new international markets.
Late payments are one of the biggest culprits for businesses having problems with their cash flow. Robust credit management can help alleviate problems from aged debtors and help avoid late and non-payments.
If you’ve ever faced a late payer then you’ll know how infuriating chasing a payment can be. The fact that the invoice should’ve been paid on time in the first place, but hasn’t, can be frustrating. Then factoring in the time spent picking up the phone and sending letters chasing the payment when that time could’ve been better spent tending to other parts of the business it can get extremely troublesome.
What is even worse is if you have no strategy in place for chasing a debt if need be or if you leave a debt too long. In that case the debt could be written off completely leaving you with no chance of recovering what you’re owed.
Leaving outstanding invoices too late may lead to you having to take the case through solicitors to the courts which is both costly and time-consuming. If things escalate and you need help recovering commercial debt we’d advise looking for a company who specialise in pre-litigation debt recovery who will help recover debts and avoid expensive legal costs or credit insurance penalties.
Steps to take for better credit management
Getting better credit management processes in place isn’t complicated. Here are some actionable steps that you can take today for more effective credit control to help prevent the need for debt collection:
1. Check that your customers are creditworthy.
When you acquire a new customer the first thing you should do is credit check them. An effective credit check will give you insight into their payment behaviour if they have a habit of late payments and ultimately whether they could be a risk to your business if you grant them credit.
It’s also important to credit check existing customers on your sales ledger. A customer’s creditworthiness can be constantly changing depending on a range of factors so it’s vital you’re consistently in the loop to mitigate risk to your business.
Use Check-it to get real-time data on the companies you do business with from independent and reliable sources like Creditsafe, Companies House, The Gazette and Unsecured Creditors in just one click. Consolidating credit information about existing and prospective customers in one place gives you all the information you need to make informed business decisions, avoid potential credit risk and protect yourself from unsecured creditors.
2. Agree credit terms, on your terms.
With any order you fulfil you can’t afford to leave yourself vulnerable, you need to ensure that you get paid with the minimum amount of debtor days possible.
To put it simply, if you need paid within 30 days, don’t accept a 60 or 90-day credit agreement.
It’s equally important to set sensible credit limits for your customers so that you’re not leaving your business vulnerable to debts that can’t be paid on time.
3. Set proper procedures for chasing and collecting late payments.
A good credit management process keeps on top of understanding when invoices where sent, the credit terms and when payment is expected. A schedule should then be put in place for chasing outstanding payments if they don’t arrive on time.
Chase-it saves you time by fully automating the process of chasing payment, now it’s never been easier with automated chaser emails, letters and text messages. Using data automatically synchronised from your accountancy package we ensure that only outstanding payments are chased. Chase payments on your terms with several fully customisable email, letter and SMS templates and scheduler.
Tools for better credit management
Accountancy packages
Most accountancy packages will have the tools included for very basic credit management. Most include debtor reporting so you can see who owes you which amounts, invoice reminders and centralised communication so that invoices, communications and other relevant documents for each customer are stored in one place.
Effective credit management requires deeper intelligence. Know-it fully integrates with your accountancy package including Xero, Quickbooks, Sage and FreeAgent to give you complete insight into your sales ledger and your customers.
Seamless integration with your accountancy package provides you with real-time customer credit tracking and data intelligence automatically giving you complete oversight over your business’ credit management all in one place. Connect your accountancy package with Know-it in a matter of seconds and get real time data from multiple sources all in one place including:
- Credit check existing and new customers.
- Track changes to your customer’s credit reports.
- Alerts if any of your customers go into administration or liquidation.
- Match any of your customer losses from unsecured creditors.
- Access all Companies House files for your customers in one place.
- Customer monitoring 24/7, 365 days per year.
Invoicing software
There’s a ton of different online invoicing tools now all with the aim of ensuring customers can easily pay you so that you get paid quicker.
If you’re not currently using any invoicing software, then you could be leaving a lot of time and money on the table.
How does using invoicing software make your credit management and accounts receivable processes better?
– Get paid faster. Online invoicing software makes it easier for your customers to pay you by offering multiple ways to pay you that suits them, eliminating friction.
– Save time. Invoices are sent automatically directly to your customer. Not sending invoices in a timely manner means it will take longer for you to get paid, a big no for effective credit management. Using invoicing software also allows you to track your invoices and eliminates the leg work and hassle of manually processing your invoices.
– Having access to all your invoices and documents relating to the invoices well organised and easily accessible helps you keep on top of your credit management processes.
– Avoid errors and address disputes immediately. Good invoice software will calculate tax, fees and currency conversions automatically helping you avoid human errors that could occur through manual invoicing. Also, by automatically sending your invoices out in a timely manner any disputes your customer might have can be resolved quicker so that you receive payment sooner.
There are a ton of different invoicing tools out there but some that we’d recommend checking out first are Wave, Zoho and Invoicely.
Know-it
Know-it is the revolutionary all-in-one credit management platform allowing you to credit check, chase for payment and collect overdue unpaid invoices all in one place.
Know-it consists of three different tools that when combined allow you to mitigate risk, get paid quicker and improve your cash flow through effective credit management from credit checking customers right through to getting paid.
– Check-it provides business credit reports and monitoring for current and prospective customers. Get real-time data from reliable sources and avoid doing business with risky payers.
– Chase-it fully automates the payment chasing process, allowing you to schedule payment reminder emails, letters and text messages with fully customisable templates.
– Collect-it provides you with instant quotes to collect your unpaid overdue invoices through our pre-litigation recovery partner, Darcey Quigley.
Know-it connects with leading accountancy packages giving you complete oversight of your customers, allowing you to improve your credit control processes, getting you paid quicker and increasing your cash flow. Integrate your sales ledger in one click and we’ll bring all of your customers, invoices and payments into the Know-it platform so you can run credit checks, automatically chase payments and begin to recover overdue invoices.
Looking ahead to the future of credit management technology
As business processes continue to get more efficient thanks to advances in technology credit managers will see many of their processes automated.
This won’t mean that the role of the credit manager is at risk of becoming extinct. Far from it. Credit managers will be freed up to handle complex cases with debtors, more meaningful tasks and help bring change to their organisation. Automated processes are here to be embraced as they’ll give workers help to be the most effective credit managers they can be, not replace them.
AI will continue to get smarter and more accurately forecast cash flow estimates based on a range of different scenarios such as world events, the economy, customer payment behaviour on a sales ledger, likelihood of liquidation and administration of customers based on notices and payment behaviour all using a wealth of different data points for accurate predictive modelling.
Decentralised credit management could be the most disruptive change in the industry using blockchain technology. The first major application of blockchain came from cryptocurrencies however this technology is extremely diverse allowing for it to even be applied to credit management.
The current systems put in place for evaluating creditworthiness of businesses is dated. They have been in place before small businesses were able to operate on a truly global scale thanks to improved infrastructure, advances in what we can do using the internet which has led to eCommerce, development of SaaS products, more efficient payment gateways as well as faster and more seamless communication.
Unfortunately, when a business seeks to do business overseas their credit rating and report does not always carry over to a new country. Different credit reporting agencies each use their own formulas and algorithms to calculate creditworthiness so there can be discrepancies.
The reason blockchain technology lends itself perfectly to the credit management industry is because it is highly secure and can’t be manipulated. It makes the contents stored in the blockchain (in this case credit information) mobile so that it can be translated globally allowing credit reports and ratings to be universally understood in any country in the world.
This will be a huge step forward for businesses operating globally, particularly in developing countries where there’s a lack of a trusted credit scoring system and will help companies mitigate risk and avoid bad debts.
Lynne is the Founder and CEO of Know-it!
She is a passionate, driven and forward-thinking entrepreneur determined to help resolve the late payment crisis gripping SMEs.
Having worked within the credit management industry for over 27 years and ran UK leading commercial debt recovery specialists Darcey Quigley & Co for over 16 years, Know-it was devleoped to make credit control more accessilble for SMEs to help them effectively mitigate credit risk, reduce debtor days and boost cashflow!
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