Many Small Businesses in Dubai struggle to get the money due to them because of poor credit control processes. This article discusses the big mistakes to avoid.

What is credit control?

Credit control is another name for ‘collecting the money due to you’. Not many businesses have a formal credit control process when they start out. They just send invoices and hope for the best. However, less than half of invoices are paid on time, which is not a sustainable policy. If you’re sending 25 or more invoices a month, it’s probably time to develop a credit control process.

Credit control mistakes to avoid

Here are the nine biggest credit control mistakes that cost businesses money. Keep these in mind when developing your policy.

1. Assuming all clients are the same

It doesn’t matter if you have 99 customers who all process your invoices the same way, the 100th could be different. And if you don’t send the invoice just how they like it, you may not get paid. Whenever you land a new customer, always ask:

• Who do I talk to about invoices getting paid?
• What information has to go on the invoice for it to be paid?
• When do you do payment runs?

With this information at hand, you’ll never waste time sending an invoice that simply can’t be paid or chasing the wrong person when it’s past due.

2. Unclear payment terms

Spell out how long your customer must pay you and identify any late fees. Put these in a condition of sale document and get your customer to sign it (physically or digitally) before you start doing business. This way, customers can’t use confusion or misunderstanding as a defence for late payment. 

3. Slow invoicing

Send invoices as soon as you can. Immediately after delivering the product or service is the best time. That’s when your customer is feeling the most goodwill and will be most receptive to paying.

4. Rolling over

Late payment is very common. It can be tempting to give in and accept it as part of life. But don’t. Review outstanding invoices regularly. Highlight the ones that are the furthest overdue, and the ones that are worth the most. Plan to get them sorted out.

Speak with the customer and consider things like offering different payment methods, giving early-payment incentives, or changing the credit terms. Don’t worry if your first few strategies don’t work. Every customer and every invoice are unique. The only way to fail is to give up on trying.

5. Shying away from the phone

When the due date’s up, it’s up. Tell your customer they’re late. We have found that 80% of unpaid invoices can be collected through email chasing alone, so start there. But when that isn’t enough, pick up the phone. Customers find it harder to justify late payment when you speak to them over the phone. And if there are issues to sort out, you can discuss them in real time instead of spending a few more days emailing back and forth.

6. Not thanking for payment

Say thanks when a customer pays, whether they were on time or not. These positive messages strengthen the relationship and actually increase the speed of future payments.

It takes no time to send a positive email. Work it into your credit control process. Just ensure it is sent within 24 hours of payment to keep it relevant and genuine.

7. Making (empty) threats

Some customers always pay late. If you’ve had enough, you might decide to charge late fees and interest, stop supplying goods or services till they pay, send out debt collectors, or take them to court.

These are serious moves and your customer may react by taking their business elsewhere. Don’t make threats lightly. But if you do make a threat, follow through. An empty threat gets you nowhere. The customer won’t take you seriously again, and you could be stuck with late payment forever.

8. Forgetting your teammates

Late payment might be the finance team’s responsibility, but others can help. Tell sales staff and account managers when their customers’ accounts are overdue. They might be able to leverage their relationship to get an invoice paid. Or they might make new sales deals contingent on old invoices being settled.

9. Use Courier Services to collect cheques

Many companies in Dubai still use cheques to make payment for invoices. Getting these collected and cashed is a very inefficient process. Use courier services such to collect these cheques on your behalf to make the process even more professional and efficient.

Conclusion

Effective credit control will get you paid faster, and that’s good for business. Write down some formal processes that explain how you’ll issue invoices, and what you’ll do if they go past due. Make sure your policies and processes avoid these common mistakes, communicate them to your team, and you’ll be on your way to better cash flow.