Defensive credit control – tips and techniques

Defensive credit control

Defensive credit control

What is defensive credit control?

Simply put, it’s knowing exactly what’s going on with your cashflow, being proactive about your processes, raising invoices correctly and on time and understanding your customer’s business processes so well that you can easily spot and remedy a situation where you’re in danger of not being paid on time.

Allowing yourself to get into an argument with your client because they haven’t paid you isn’t being defensive, that’s being aggressive.

Defensiveness is about assessing a situation, noticing what others are doing, thinking about what might happen, setting expectations and being aware of what could go wrong and why. If you’ve ever done a defensive driving course, you’ll know what I mean.

In the context of invoicing and cash flow, being defensive means learning to do things correctly and efficiently, understand the cause of any issues and address any problems your customer may have, all of which help you paid on time.

We never talk about money

We hate discussing money, we hate chasing unpaid invoices, we dread picking up the phone to ask for it, but we sure want it in our bank accounts.

Why let things get to that stage? Using a few defensive credit control techniques, you can change that to having your invoices paid, on time, every time, without ever having to ask for money.

Why do clients pay late?

There may be a few reasons why clients pay late ranging between shabby excuses and genuine reasons. Take a moment to understand what the reason could be.

Late payment – Is it really your clients’ fault?

The biggest thing you can do to get your invoice paid is to get your invoice read. Did you send your invoice to the right person at the right address? How did you send it? Did you specify clear payment terms on your invoice and in your proposal? Did you raise your invoice as soon as you finished the work? Did you ask for payment upfront? Did the invoice have all the right information the client needs to pay you?

Get to know your customers and their processes.

Staying in regular touch with your customers is essential for healthy cash flow. Customer relationships aren’t just about getting you more getting more sales opportunities, they’re just as important in getting your invoice paid on time.

Do you know what happens to your invoice?

It’s the end of the month, you’ve raised all your invoices and sent them to clients. Did they receive the invoice? Did it go to the right person? Is it waiting for someone to approve it? That’s why you need a follow-up process.

Organise your timeline

Do you start to feel cross with your customer because they haven’t paid you? You feel you’ve delivered a great service but haven’t been paid. It makes you think what’s wrong?

Something you may not have realised is that in the natural course of doing business, it can take at least 3 months to get your invoice paid which is why you need a plan, follow-up process and a script.

It’s personal

Most people start in business by doing work for people they know. Once you get more established, you start charging them and then they don’t pay, what should you do? Don’t be afraid about phoning a friend. Read about doing business with friends and worrying about chasing that unpaid invoice.

Be more defensive if you want to get paid on time

Over in the Cash Flow College I’m teaching people how to put processes in place to make sure they get paid on time; starting with the proposal you send to a client, your business terms and conditions, invoicing, statements, bank reconciliation, along with tips and techniques for resolving unpaid invoices.

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