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Top Ten Credit Control Tips for construction companies

The late payment of business debts is one of the biggest problems faced by construction companies. Late payment is more than an inconvenience; it is a major hindrance to cash flow and a drain on profitability. It can mean that your business growth is stifled while you fund another's expansion. Remember the key to successful cash flow is good planning. You should know exactly when payments are due in and out of your bank account.Effective credit management, aimed at reducing the risk of late payment and bad debt, is therefore an essential part of good business practice.

(1) Develop good habits for every day credit control; invoice promptly and keep invoices clear and easy to understand, keep unpaid invoices in date order so you can see the oldest outstanding invoices. Also chase up early any customers you suspect have problems paying.

(2) Have a system for chasing debts and be firm but fair. Don’t be apologetic, it is your money. It is easy to issue a statutory demand, which is a written request for payment without the need to instruct a solicitor.

(3) Set your terms at the start of the contract, tell customers about your credit control and link it to the overall sales process.

(4) Understand the customer’s payment process and procedures check if they undertake a monthly cheque run or if they have a system to pay within a set amount of days.

(5) Consider credit checking potentially large customers. Your business and average order size should assist in setting this limit.

(6) Follow up promptly on any broken promises of payment.

(7) Make maximum use of standing orders, direct debits and online payment, the easier you make it for a customer to pay, the easier it is to collect your debts.

(8) Maintain the information flow with the customer, the more you know the better you can control credit risk. Build relationships and gain an insight into their future plans.

(9) Watch for the danger signs – be wary of changes in customers normal pattern of activity (changes to payment schedules, returned mail, unavailability of staff, a rise in number of account queries, upsurge for trade references).

(10) Ensure your staff are properly trained in credit management and debt recovery (short courses are held locally).