The increased use of buy-now-pay later credit options have helped to increase sales, but it has also created new credit management issues for companies. In 2022, the UK government estimated that small businesses were owed an estimated average of £22,000 in late payments.
One way to help resolve this issue is to look to technology. In this article, we will investigate how digital systems, particularly cloud technology, can play a big part in improving the credit control process.
What is credit control?
Credit control, or credit management, is the strategy used by a business to balance encouraging sales through credit and avoiding losing money to non-payment. This can involve giving credit limits and making rules about which customers are eligible for credit.
Why is strong credit management important?
Strong credit management is must so that businesses can make informed decisions linked to the money they have available. It also ensures they evaluate the creditworthiness of potential consumers. This evaluation could involve analysing financial data such as trade references, payment history, and the customer’s credit score. By doing so, the business can mitigate the risk of default or late payments, thus improving its cash flow and liquidity.
Moreover, credit management can help businesses build long-term relationships with customers and suppliers. For example, a manufacturing company might extend credit to its trusted suppliers, thereby fostering a long-term relationship based on mutual trust and benefit.
Finance teams can use analytical measures to control danger, safeguard cash flow, and uphold crucial client connections. Companies looking to protect their financial health can achieve this more seamlessly when they harness the power of automation and have a clear understanding of the latest regulations.
Areas of credit control improved by Cloud tech
One of the biggest obstacles to credit control is outdated credit management methods. This includes managing customer accounts and debt collections through spreadsheets, paper-based records, ledger books, and manual follow-ups.
Even if these techniques have proven effective in the past, they are very manual and time-consuming compared to today’s Cloud-based credit control. Traditional databases often provide quicker immediate access to data due to their on-site nature. However, cloud computing has been found to have higher reliability and lower downtime compared to traditional IT systems.
Here are some areas that Cloud tech has improved:
Follow-ups
Following up with consumers for overdue payments may get tiresome in the absence of a streamlined procedure. This may result in irregularities in the follow-up process, which can cause payments to be delayed and the amount of debt to rise.
Cloud technology helps to track payments quickly. This makes sure any slip-ups or irregularities are marked right away. So, companies can fix problems quickly, reducing the chance of late payments and bad debt piling up.
Tracking and managing customer accounts
It can be difficult to track client payments, unpaid bills, and account anomalies when using manual methods. This may cause delays in locating and contacting clients who have made late payments, which is ultimately detrimental to cash flow.
Credit control in the Cloud allows you to easily monitor all interaction with customers, no matter where they are or what time it is. This 24/7 access to data ensures that any differences in payments or issues with accounts are handled swiftly. This helps reduce the chance of late payments and the technology makes it easier to track cash flow too.
Security
When it comes to managing the financial data of customers, security is a substantial priority, as cyberattacks have become more common and sophisticated today.
Cloud technology has strong protection features, like encryption and accessibility rules to keep your important information secure. When your data is saved in the Cloud and stored online, it's safe from physical risks like sabotage and natural disasters, meaning you won’t lose the ability to know what you’re owed.
How automated credit control can help your business
Let's examine a few of the ways automated credit control can help the continuity of your business:
Improved cash flow
It can be tricky to navigate the need to be simultaneously persistent and courteous. However, computerised credit control simplifies this. Being proactive pays off, as evidenced by the 2022 late payment report, which indicates that companies that follow up on 90% or more of their bills each month have the highest likelihood of receiving payment before the invoice due date.
By automating credit control, you can be more confident customers will make timely payments, which will ease the burden of covering expenses and paying suppliers, while also allowing businesses to save time and efficiently manage their cash flow.
More time
According to Debt Register, 32% of businesses devote up to 75% of their time(between 51% and 75%) collecting past-due invoices. It was discovered that nearly a quarter (24%) were devoting even more hours to the activity (76%+). Your staff could be working on other projects to advance and expand the company during this time, which is exactly what they’re able to do when credit control is automated.
Improved customer relationships
Credit control automation improves visibility so that customers can see the process and understand what steps the company is taking to ensure they get paid on schedule. When uncertainty is eliminated, all staff members are able to properly explain the stages to the customer and reduce friction in the process.
Better analytics
All finance teams require data to aid their cash flow forecasting and decision-making processes (including when to put clients on hold). But when credit management is managed inefficiently, onsite teams are juggling daily responsibilities and perhaps disregarding the full potential of the related financial data.
Onshore teams will make more accurate forecasts when using a dedicated credit management platform. Automation relieves them of monotonous work so that they can dive into the insightful depths of data analysis.
How Advanced can help you with your credit control
Credit management includes the assessment of creditworthiness, setting credit limits, monitoring credit utilisation, and ensuring timely repayments. With the help of Advanced Financials you can integrate these functions seamlessly.
Credit control management software can help finance teams to keep track of all your business’ credit-related matters in one place, reducing the chances of errors and oversights. Moreover, the tool automates tasks like credit checks, payment reminders and more, giving you more flexibility and control.
