I am considering offering some sort of credit control functon as a few people I have spoken to have all complained how time consuming this is, especially these days.
Is this something anyone else offers and is it sucessful? Do you just charge the same rates as you do for bookkeeping or not?
For starters, do you know anything about credit control?
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I do indeed, I worked in credit control pretty much from leaving school and as I moved more into the accountign side I always still had credit control under my area of responsibilty whilst I was working.
I've got about 15 years experience in credit control and have set up systems for it at 2 seperate firms I have worked at.
sounds good. Main thing is that means you know how not to upset the people that you're chasing unlike some of the temps who have worked for me in the past!
Bookkeeping fee's are normally justified on the basis that we are saving a client time and money by outsourcing to those with specialised knowledge of keeping books. The rate negotiated is normally a flat fee based or hourly rate on a justifiable number of hours worked. This seems somewhat different to credit control which is based more upon results than the amount of time that is spent achieving those results.
If you go down this path I would base fee's on a percentage of aged debt reduced with varying rates for short and long term debtors (Minimal fee for 1 month, increasing at three, six and twelve months). In taking this approach the client feels that their money is being justified as they are getting a definite return on it (comparable to no win no fee).
As you know, the older the debt the less likely that it is to be repaid so 20%+ may be acceptable. You may not actually want to be bothered with chasing one month old debts although as you know, a good credit control system doesn't wait for debts to be outstanding before giving the courtesy call (Just checking to ensure that you received the invoice).
I would also get written consent from each client as to the percentage reduction in the debt that they are willing to take in order for you to be able to negotiate with clients.
I assume that you have unfettered access to the records of your clients so that you are able to track the payments against records. In my experience a lot of cases that don't get paid are because of bad record keeping by the companies doing the chasing rather than those being chased... Then again, my credit control is around 80% plc's and the rest of it is with larger limited companies.
What stage will you be taking things to? Just chasing debts, litigation prep or full service? I've found most companies offer to chase debts but few go as far as preparing all of the legal case ready for the solicitors to take over. If you do that then you should be able to demand higher fee's for all services.
Bookkeeping insurance wouldn't cover proper credit control services so you would need to look into that as well.
Sure that there's more that I should write but can't think of it for now.
Good luck,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I currently am in charge of the back office section of a business that looks after the back office for other businesses, incl bookkeeping, credit control, facilities, IT, banking etc etc - we charge a flat fee per month for that arrangement, which increases every 6 months as the business grows, all written in a legal agreement.
I think you must decide how much time you will devote to this and charge accordingly. Its good to then get some kind of management figures from this ie what % of debt is collected per week, not necessarily the £ value, as it does all depend on the size of the debtor ledger. You must also agree with the client whether to stick to rigid terms etc as I have found that you do not have friends in credit control just acquaintances with whom you have a good rapport.
Would the company be prepared to go legal. They should and we do when required and it brings varying results. Also you have to deal with those that go into administration etc, so access to the records is vitaly important - however you need to ensure that the company has back up to all invoices created to ensure you can follow through on any threats!
Like yourself I've worked in credit control over 15 years and ended up on the accounting side of things. I ran my own team via banking and for a local service centre. I was responsible for hiring and firing & I was surprised that credit controllers with legal experience were second to none, but, finding them was another thing. Credit control is not just about chasing, its reconciliation work, debit notes etc. I personally feel its a good service to offer especially if, like myself you can attend county/high court also on behalf of clients. Let us know how things go.
I've thought about adding Credit Control into our service range...but you need to develop business processes and systems. I've thought about charging a fee for developing a Credit Control system for the client with trigger points, scripts and standard letters.
