Credit Control for New Zealand Businesses


Your credit control policy and systems can make or break your business. Many New Zealand businesses are relatively small and under-capitalised.

If you are selling on credit and don't manage your debtors ledger efficiently, the negative impact on your cash flow and subsequent need for working capital could put you out of business.

Often, business people are surprised to find out that this can happen to businesses which appear to be successful and profitable. They are busy, there is plenty of demand for their product or service. They have good profit margins and their overheads and expenses are under control. Yet, they can still come under enormous financial pressure, and ultimately go out of business, if they do not manage their cash flow well enough.

Good profit margins, low overheads and expenses and high demand are not cash in the bank until......, well until the cash turns up in the bank. If your business gives credit of any kind you should be doing one or more of these three things:

1. Give Less Credit

Review your policies and practises around credit and, if you don't really have to provide credit, either stop giving people credit or give credit to less customers. A lot of New Zealand businesses seem to think that providing credit is somehow expected or normal. It doesn't have to be.

2. Have Good Policies and Procedures

Have clear, robust and well managed credit control policies. You need to be a good administrator yourself and have sufficient time available to manage your credit policies your self without detracting from the rest of your business activities. Or, you need to have reached a level of turnover and profit margin that you can have a staff member perform this role, again without detracting from their other functions.

3. Outsource to Specialists

3. Alternatively, you can outsource your credit control to credit control specialists. The potential benefits of this can be significant.

You will save on time for yourself and your staff - time which can be used to generate more business, serve existing customers better, or for you to do what you'd rather be doing other than ringing slow payers.

Your cash-flow will also improve. Having specialists perform this function will almost invariably result in cash flow improving. This can only be good news for your business.

Finally, even without the benefits of time saving and improved cash-flow, if you are currently paying someone else to do this, you will likely make a direct saving as the cost is unlikely to be as high as that person's wage cost for the time they spend doing credit control. A specialist will have systems, knowledge, skills and experience which allow them to perform this task more efficiently.