creditcontrol

Credit control refers to the set of practices a business uses to manage the credit extended to customers and to optimize cash flow. It encompasses establishing a credit policy, assessing customer creditworthiness, setting credit terms and limits, and monitoring accounts to ensure timely payments. The aim is to balance sales growth with the risk of bad debts.

Core activities include credit risk assessment, order approval, and the ongoing management of accounts receivable. This includes performing credit checks, deciding whether to extend credit, determining appropriate payment terms, and issuing invoices. A structured collection workflow, including reminders, reconciliations, dispute resolution, and escalation to more formal recovery methods, is also part of credit control. Regular aging reviews help identify overdue balances and forecast cash inflows.

Monitoring and risk management rely on quantitative indicators such as days sales outstanding (DSO), aging bucket analysis, and the ratio of bad debts to revenue. Companies may maintain provision for bad debts based on historical experience and forward-looking risk assessments. Effective credit control also involves data governance, compliance with regulatory requirements, and coordination with finance, sales, and customer services.

Technology plays a central role, with enterprise resource planning and accounting systems, customer relationship management, and automated dunning processes aiding efficiency and accuracy. Data from credit reference agencies and external databases can inform risk scoring. Challenges include economic volatility, late payments, international trading terms, and maintaining customer relationships while pursuing timely collections. Overall, robust credit control supports liquidity, profitability, and financial stability. See also accounts receivable, credit risk, and debt collection.