Introduction The paper focuses on defining various components that are critical to the credit control process. It highlights the role of invoice; debt aged reports, credit notes and chase letters in the credit control process. The possible impact of bad debt, statutory demand, the process of credit account application with the vital role of court in such cases is being explained in the paper.
Over the passage of time, the notion of credit control has gradually become important because it possesses a great impact on the business profitability, sustainability and corporate image. Credit control process intended at serving the twofold purpose of (a) reducing risk of loss because of bad debts by denying and restricting credit to clients who are not a good as regards to credit risk, and (b) to increase revenue of sales through extending credit to clients who are considered a good credit risk. In addition, credit control effectiveness relies in procedures used to judge a prospect's creditworthiness more willingly than in the course of actions employed to extract the unpaid money.
Role in the Credit Control Process
It is very important to send customers invoices when the order is completed and ready to ship. A number of businesses do not make payment until they get the invoice, and setback in getting an invoice may result in getting payment. It is equally significant that the invoice is addressed to the correct customer, along with 100 percent accurate information. The invoice will include information such as detail information about product/service and its cost, the credit terms, where and how to pay, purchase order number if needed, and a reference number, which should be clearly listed (McGrail, 2008, p. 103).
The accurate and detail information facilitates in confirming receipt of the invoice, which as a result, decrease the possibility of disputes between the firm and the customer as they are aware of product/service, mode of payment and amount. Moreover, invoice assists in building a rapport with contact and portrays the professional approach of business to keep the control of credit.
Aged Debtors Report
Aged Debtors Report offers debt position summary of each customer classified into the time period, they have money payable to the company from present or more than past three months. This report includes the analysis of aging into four categories, such as present, one or two months older, and so on. Aged debtors report embraces all adjustments the company has made for refunds, write offs, debits and credit, which helps in keep a check on debt and credit amount that ultimately helps in controlling credit (Edwards, 2004, p. 273).
It is a financial instrument a holder may swap for goods of equal worth, from the organization and the person who issue the credit note. Generally, it cannot be exchanged for money/currency. It is basically a negative invoice, as well as is employed to correct mistakes in an already issued sales receipt and invoice. In case, a person has already made a payment for a ...