{"id":281546,"date":"2024-08-23T15:32:22","date_gmt":"2024-08-23T03:32:22","guid":{"rendered":"https:\/\/www.reckon.com\/nz\/?post_type=sbh&p=281546"},"modified":"2025-01-28T13:06:27","modified_gmt":"2025-01-28T01:06:27","slug":"credit-control","status":"publish","type":"sbh","link":"https:\/\/www.reckon.com\/nz\/small-business-resources\/invoicing\/credit-control\/","title":{"rendered":"What is credit control?"},"content":{"rendered":"

[et_pb_section fb_built=”1″ custom_padding_last_edited=”on|phone” _builder_version=”4.23″ custom_padding_tablet=”” custom_padding_phone=”0px||||false|false” global_colors_info=”{}”][et_pb_row column_structure=”1_3,2_3″ _builder_version=”4.23″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” width=”100%” custom_padding=”||0px||false|false” global_colors_info=”{}”][et_pb_column type=”1_3″ module_class=”table-contents” _builder_version=”4.23″ background_color=”#f4f4f4″ custom_padding=”25px||25px||true|false” sticky_position=”top” sticky_limit_bottom=”section” sticky_position_tablet=”top” sticky_position_phone=”none” sticky_position_last_edited=”on|desktop” pac_dcm_carousel_specific_module_num=”0″ border_radii=”on|24px|24px|24px|24px” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text _builder_version=”4.23″ text_font=”||||||||” locked=”off” global_colors_info=”{}” background__hover_enabled=”on|desktop”][\/et_pb_text][\/et_pb_column][et_pb_column type=”2_3″ _builder_version=”4.16″ custom_padding=”|||” pac_dcm_carousel_specific_module_num=”0″ global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Copy paste body text here” _builder_version=”4.27.4″ header_2_font_size=”32px” hover_enabled=”0″ header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” locked=”off” global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n

What is credit control and how does a credit control policy example apply to your small business? The term credit control refers to any actions you undertake to reduce the time taken for a debtor to pay what they owe your small business.\u00a0<\/span><\/p>\n

When you invoice a customer (which is the same as expending them credit), you can use measures such as reminders, credit control policies, late fees, reminders, and incentives.\u00a0<\/span><\/p>\n

These credit control techniques are all aimed at reducing the amount of time it takes your customers to settle their invoices.<\/span><\/p>\n

Well executed credit control policies and measures not only help your business thrive with healthy cashflow and <\/span>profitability<\/span><\/a>, it also helps you avoid messy situations like debt collection or bad debts.<\/span><\/p>\n

Let\u2019s look at some common credit control techniques and how you can harness them to boost your business\u2019s cashflow.\u00a0<\/span><\/p>\n

What is a credit control policy?<\/strong><\/h2>\n

A credit control policy is a methodology you adopt as a business when extending credit or issuing invoices. There are three commonly accepted tiers of credit control policy; restrictive, moderate, and liberal.<\/span><\/p>\n

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  1. Restrictive<\/b>: A restrictive policy dictates that you only extend credit to customers with good credit history and will have tighter terms and conditions and limits on credit. You may also require down payments and have harsher penalties.<\/span><\/li>\n
  2. Moderate<\/b>:\u00a0 A middle ground approach where terms are still tight and credit limits are capped. You\u2019ll still be paying attention to credit history but will be more lenient in general.<\/span><\/li>\n
  3. Liberal<\/b>: A liberal approach will see you extending credit to almost any customer. Credit history will likely be absent, limits will be higher, and terms and conditions will be looser.<\/span><\/li>\n<\/ol>\n

    Credit control policy example<\/strong><\/h3>\n

    Let\u2019s have a look at a credit control policy example. If you\u2019re a plumber and have had bad experiences with late payments or having to pursue debt collection, you may choose a <\/span>restrictive<\/span><\/i> credit control policy:<\/span><\/p>\n