10 Tips to Restaurant Credit Control. Learn the 10 tips to restaurant credit control and how to control credit in the marketplace to make a profit.
Cashflow is the ‘lifeblood’ of every business and poor credit control will put the life of your business at serious risk.
In today’s business environment, bad debts can also increase interest rates, shrink profits and, ultimately, close the door on your business.
Yet in many areas of business, credit is a fact of life and by not offering credit to your customers you could also be jeopardising your business success.
By following some simple procedures, you can keep track of credit to minimise your chances of hassle-free, prompt credit collection.
If you are in a catering service business and you find it necessary to give credit to your customers, you should take action to protect your business from credit losses.
You cannot afford to offer credit to your customers without including the cost of the service in your rates. And you cannot expect to give better credit terms to your customers than you receive from your suppliers. Remember, credit is a two-way function. Your own credit rating is based on your ability to pay and your customer should receive the same consideration.
An easy way to think of credit to a new customer is to regard it as lending money. Would you lend money to a total stranger without some security?
The following will provide you with some basic rules for controlling credit:
Communicate Effectively
- Make sure your trading terms are perfectly clear. You should spell out your terms on your invoices and statements. If possible, avoid exceptions and variations.
Mail Invoices Promptly
- Prompt and accurate invoicing with straight forward product descriptions will show your customers that you are serious about payment terms and collections.
Keep Up-to-date Records
- One of the keys to effective credit control is your ability to know immediately who owes what and when it is due.
Read the Financial Press and Trade Journals
- Due to their day-to-day responsibilities, many small business operators neglect the ‘big picture’ and are out of touch with changes in the marketplace or the economy. Financial media and trade journals are a cost-effective way to get the ‘feel of your market’.
Avoid Special Cases
- Making special arrangements can backfire. No company is so large or important that you should let them ignore your terms. Rather than damaging goodwill, insistence on firm, simple settlement terms will create a healthy respect for your financial efficiency. Remember, it may only take that one exception to drain your business of its cash.
Don’t Overlook Small Accounts
- Too many out-of-hand small accounts can cause real problems. They tend to build up and become a significant part of your turnover. As with larger accounts, you should have a simple system of regular review and control.
Start at the Top
- When attempting to settle accounts, you should deal directly with the decision-makers. Discussions with other people on overdue accounts can waste time. By all means, send a letter (via email), but you should follow it up with a personal visit if possible.
Keep Your Promise
- Don’t threaten legal action unless you intend to go through with it. Issuing empty threats will probably mean you will wait even longer in the future.
Watch Trends
- Gauge how well you are controlling your credit with some easily understood measures such as average days sales outstanding, results against targets and proportion of disputed accounts.
Spread the Message
- Communication is the key to preventing or resolving most problems. All your staff should be well informed of credit control procedures and the reasons behind them. Your ability to communicate internally will probably be linked to your business’ ability to control credit in the marketplace.
Learn the 10 tips to restaurant credit control and how to control credit in the marketplace to make a profit.
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