Simple Laws of Credit Control

Managing credit effectively can be a complex task, but there are a few fundamental principles that can help businesses reduce risk and improve cash flow. Credit control is an essential function of any business that extends credit to customers, and following these simple laws can help ensure that debtor balances are kept to a minimum.

Law 1: Know Your Customers

The first step in managing credit is to know your customers. This means ensuring that you have the correct contact information for each customer, as well as checking their creditworthiness before offering credit terms. It’s important to have a clear picture of each customer’s financial history, as this will help you to determine whether or not they are likely to pay on time.

Law 2: Set Clear Payment Terms

Once you have established the creditworthiness of your customers, it’s important to set clear payment terms. This should include the payment due date, as well as any penalties that may be charged for late payment. Make sure that your customers are aware of these terms, and that they understand the consequences of failing to pay on time.

Law 3: Monitor Your Accounts

Regularly monitoring your accounts is crucial for effective credit control. This means keeping a close eye on customer payment patterns, as well as monitoring credit limits and balances. By doing so, you can quickly identify any potential issues and take action to resolve them before they become a problem.

Law 4: Communicate Effectively

Communication is key when it comes to managing credit effectively. This means keeping your customers regularly informed about their account status, as well as any changes to payment terms or credit limits. It’s also important to be proactive in chasing up late payments, as this will help demonstrate that you take credit control seriously.

Law 5: Be Prepared to Take Action

Finally, it’s important to be prepared to take action if a customer fails to pay on time. This may involve contacting them to discuss payment options, or even taking legal action if necessary. By having clear policies in place and following them consistently, you can help to ensure that your cash flow remains steady and your business stays protected against bad debt.


Effective credit control is crucial for any business that extends credit to its customers. By following these simple laws, you can help to reduce risk, improve cash flow, and ensure that your business stays protected against bad debt.

  • Know Your Customers
  • Set Clear Payment Terms
  • Monitor Your Accounts
  • Communicate Effectively
  • Be Prepared to Take Action

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