Checklist that highlights “Best Practice” for effective Credit Control

Below is a checklist that highlights “Best Practice” for effective Credit Control.

  1. Decide which customers will receive credit – credit is not an automatic entitlement.
  2. Use a credit application form along with following documents:
  • Customer Visit Report (to be completed by Sales Representative. This report should contain key information about a prospective new customer i.e. length of time in business, size of business, where they have previously purchased goods from, financial information etc.)
  • Details of the owners / partners / directors
  • At least three trade references
  • Two years’ audited financial statements
  • Company trade license copy
  1. Make a credit check on each new customer (bank references –v/s- trade references v/s Management accounts).
  2. Set a credit limit for each new customer. (There are two aspects to consider your company’s exposure to bad debts and your credit control)
  3. Set a “minimum order” level for credit sales.
  4. Obtain a personal guarantee from “doubtful” customers.
  5. Assess if you need credit insurance.
  6. Conduct regular credit checks on your main customers.
  7. Use fully documented Terms of Trade.
  8. Ensure your Terms of Trade have procedures to deal with disputes.
  9. Ensure your Terms of Trade specify Credit Terms.  Best terms are 30 days from date of invoice – not 30 days from end of month.