Do you have internal measures in place to control your company's credit sales and purchases?
Do you know what to do if debtors pay you late? Or when you pay creditors too early?
Having a credit control system helps you control the way you collect and pay what's due for sales or purchases, and reduces the risk of loss in your business.
In just five easy steps you'll be able implement a sales credit control system.
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How to implement a sales credit system in five easy steps
Step#1: Employ a competent financial personnel
Make sure your employees are competent. Train your employees to work with customers and on how to sell goods on credit.
Make sure your employees are reliable when working with cash and payments received. So when you recruit new employees make sure that you run a credit check first.
Step#2: Have a good record keeping practice in place
You need a good source document with reference numbers that follow in numerical order. A source document is basically a document which helps keep track of your accounting transactions.
For example an invoice book.
Make sure you have a duplicate of this document you can keep in a safe place.
This enhances the trace of all your debtors when auditors come visit you.
Step#3: Segregate duties
Make sure you segregate duties between the following areas:
Writing up debtors;
Handling and banking of cash;
Receiving customer payments; and
Credit not issuing.
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Ten budget templates to forecast and manage your costs
You can use them individually or while you create your operating budget. You'll draw figures from these budgets so you can keep control of costs and maximise profit. Each budget chapter comes with a free Excel budget template for you to customise and use straight away.
Find out how here…
Step#4: Set up control authorisation
Try to confirm each step in the sales credit system by a stamp or signature.
For example,your driver needs to sign when he receives the goods from the warehouse. He must get the customer to sign as proof he received the goods from the delivery vehicle.
Step#5: Monthly reconciliations
Compare your debtor's ledger to your general ledger.
This ensures your debtors are complete and the general ledger is up to date.
Your customer control general ledger account represents the total of your customers at the end of each month. When you compare the general ledger account with your debtor's ledger balance it ensures you don't over or under estimate the value of your customers.
You also need to look at the following:
Look at long outstanding customers and follow up on payments;
Compare invoiced orders with processed orders;
Follow up with customers so phone the regularly or send them emails; and
Gives customers monthly statements clearly stating how much money they owe and which invoice it relates to.
Be careful when you give credit to customers. It's important to do a credit check on a customer before giving him terms.
Do you want to know how to manage your dedtors and creditors, improve cash flow, analyse your financial statements and eliminate fraud in your company…Click here now to find out more