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Credit control

We consider what you need to be checking in order to understand if your customer can support the amount of credit you are granting.

  1. Factsheets
  2. Starting up in business

What are the points to consider when taking on a new customer? Similar points may arise in regard to your suppliers. If you are starting, or have recently started a business in the Finsbury Park, London area we, at C Charles & Co Ltd, can help you manage the credit requirements of the business.

Obtaining new customers is great for business, unless they fail to pay you. If you fail to check that the customer can support the amount of credit you are granting, then commencing legal action when they do not pay can be a long, drawn out and potentially costly process.

If payment from the customer is not obtained and the goods or services have been provided, your cash flow is likely to be under pressure. Ensuring that customers pay on time will make managing your business easier.

If you fail to pay your suppliers because you have not been paid by your customer then you could also be damaging their business as well. This is not only bad business practice but could be regarded as corporate social irresponsibility. Treat your suppliers as you want your customers to treat you.

Factors to consider

The first thing you should do is get to know your customer. This should start before you take on a new customer and before you give them any credit. The bare minimum of what you should know is:

  • the exact name of the customer and the trading address (consider using Companies House Webcheck service)
  • their type of business structure, e.g. are they a sole trader, a partnership or a limited company?
  • names and personal addresses of the proprietors if their structure is unincorporated (consider verifying letter headed paper to support this information)
  • contact other suppliers to obtain references
  • their credit rating through a credit agency.

Before you provide goods or services to any customer make sure you address the following:

  • discuss and agree payment terms with the customer before accepting the order
  • agree the terms in writing
  • review any documentation from the customer where they try to change the agreed payment terms
  • negotiate and agree payment terms with suppliers before accepting the order
  • if there is a gap between customer and supplier payment terms, consider whether finance is available to bridge the gap (this will require an understanding of your working capital management)
  • produce a cash flow forecast covering all expected income and expenses
  • have a standard policy in place to ensure that payment terms cannot be altered without appropriate authorisation
  • ensure that you have the right to apply late payment and interest charges on invoices.

After you have provided goods or services to a customer ensure that you:

  • raise invoices promptly
  • raise invoices accurately to ensure all items are included at the quoted prices
  • include a reference number for the order and then quote this if any dispute arises
  • have everything the customer requires on the invoice
  • have a process for chasing invoices
  • have a process for dealing with disputes
  • keep a log of disputes to ascertain whether similar disputes for customers occur
  • ensure that your invoices are fully compliant with HMRC for VAT purposes.

Consider your suppliers - treat them as you would like to be treated

Remember that not paying your suppliers on time is a bad business habit and it may result in a drop in your credit rating. You should:

  • ensure you advise your suppliers of any disputes as soon as they occur
  • pay on time by ensuring that your creditors' ledger is accurately aged and
  • keep your suppliers up to date with any issues you have with paying on time.

Some businesses unfortunately go ‘bad' so you may wish to consider obtaining credit insurance where the business:

  • would not be able to function if key customers went insolvent
  • does not have the controls in place to ascertain whether a customer is likely to go insolvent
  • is struggling to obtain information on prospective customers
  • needs to improve credit management
  • is considering a new market venture.

Businesses should consider obtaining factoring and financing options when:

  • insufficient cash reserves are available to pay suppliers on time
  • the business needs to grow
  • the level of short term finance (including any overdraft facility) is insufficient
  • staff do not have the right level of credit management skills.

How we can help

If you are struggling with credit control in these difficult times then we would be happy to discuss this further with you. If you are starting, or have recently started a business in the Finsbury Park, London area please contact us at C Charles & Co Ltd for more detailed advice.

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After working with Nicholas Charles for a year, we brought him on to join our board advisory team for BankToTheFuture.com because of his unique combination of financial tax advice, commercial understanding and ability to introduce the right connections at the right time. Nicholas has provided tax advice to our investors, facilitated introductions to investors as well as help us to implement controls and procedures to get the right balance of compliance, responsible procedures and good business practices. If you want somebody that understands the commercials of business and deal making combined with the technical skills of finance, tax and increasing shareholder value, Nicholas Charles is your man.

Simon Dixon | CEO & Co-Founder BankToTheFuture.com
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Nicholas has been an active supporter of our charity, and the Charles Group have sponsored our last three summer parties. He understands family businesses like ours but more importantly the need to give back to the local community and the life changing differences that can be brought about by charities. This is why we quickly became a client of the Charles Group. Nicholas appreciates that having a purpose greater than the individual needs of members can bring a family closer together as well as inspire the next generation. We admire Nicholas’ authentic approach towards Family Prosperity.

Paul Strank MBE and Irene Strank MBE | Founders of Paul Strank Roofing and the Paul Strank Charitable Trust
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I have worked with the Charles Group for 2 years on some very exciting projects and his ability to listen, provide objective advice and support my goals and ambitions has been a tremendous asset to me and my businesses. Nicholas cares deeply about those he works with and seeks to ensure great outcomes for all.

Penny Power OBE | Serial Entrepreneur
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The Charles Group has been our trusted accountants since we founded B-Engaged in 2013. Over the years, they’ve become an integral part of our journey, consistently going above and beyond to help us save money, optimize our structures, and minimize tax liabilities. They are more than accountants—they are key partners in our success.

Ehsen Shah | Founder and CEO of B-Engaged: Sports Marketing Activations Agency
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From our early days as a startup to becoming one of the largest suppliers to Assos and River Island, The Charles Group has been a constant and invaluable partner. They’ve played a vital role in reducing our overheads, analysing and advising on client profitability, setting up our internal bookkeeping systems, and providing invaluable business guidance. Their expertise has also helped us manage and reduce our growing tax liabilities. The team at The Charles Group has truly become part of our business family.

Gabby Chrysanthou | Director and co-founder of Loaded London