Best Practices in Credit Policy and Debt Recovery in the UK

Within business operations, where financial stability and profitability reign supreme, having a robust credit policy and effective debt recovery strategy in place is essential. These frameworks ensure you are following best practice within the context of customer relationships. For companies in the UK that offer credit options to customers, optimising these processes can be vital to success, which is why we’ve created a blog outlining the best standards to uphold.

What is a Credit Policy?

A credit policy is a set of guidelines and procedures that a business uses to govern its credit-related activities. Your primary objective of business is to trade profitably, a big part of that is getting paid on time. With fraud on the increase, knowing your customer is a key fundamental part of the process, ensuring you have sufficient controls in place. An effective credit policy can protect your business from late payments and therefore improve cash flow.

What to Include in a Credit Policy

A credit policy should contain the following:

Terms & Conditions

The foundation of any sound credit policy starts with well-defined Terms & Conditions. These should be comprehensive, transparent, and easy for customers to understand. They set the stage for a successful credit relationship by outlining the rules and expectations.

Customer Application Form

A Customer Application Form is your initial point of contact with potential credit recipients. It's an important tool for gathering essential information about your customers. Using this form, you can determine the contact details of the customer as well as ensure they have the finances to settle the invoice.

Setting Credit Limits

Striking the right balance between offering customers flexibility and safeguarding your business is essential. When you set credit limits, you’ll want to cover the types of credit, the amount available, and repayment terms.

Customer Service

Exceptional customer service should extend to your credit operations. Maintain open lines of communication, be responsive to customer enquiries, and foster positive relationships. A satisfied customer is more likely to meet their credit obligations.

Credit Control

Credit control is an integral part of any business. Essentially, the lifeblood of any business is cash and liquidity, which is enhanced through a robust credit policy using credit control.

The are many great Credit agencies providing great value monitoring systems to observe your customers, in many of the packages available you can control parameters and the system will then provide you updates if any of those parameters are triggered or breached.

Statements

Regular statements are important for providing transparency for customers in credit transactions. They keep customers informed about their financial obligations and provide you with a record of transactions.

Letters

Formal letters are valuable tools in credit management. Whether sending payment reminders or updating credit terms, letters provide a structured and professional way to communicate with customers.

Telephone Calls

Engaging with customers through telephone calls can be a necessary step to help solve payment issues and address concerns more effectively. If a customer is ignoring you regarding payment, speaking to them directly over the telephone could persuade them to act.

Debt Escalation

Prevention is far better than cure, however if you do business on credit, it is inevitable that a customer will become overdue, or a debt disputed. In such cases, a comprehensive debt recovery strategy is crucial.

How Could Debt2Collect Help?

If your customer is not repaying their debts after friendly reminders, you may benefit from using an automated debt recovery platform like Debt2Collect. Send formal debt collection letters such as a Late Payment Demand and Letter Before Action. If you need to take action, knowing your customer and providing the supporting documentation are key to a successful recovery.

If you’re struggling to receive payment from customers but are unsure where to start with debt recovery, get in touch with a member of our helpful team to find out more about how debt collection letters could help your situation.