Customer Accounts
When a new credit account is opened, or further credit is provided to an existing customer, Credit Control must play an integral role in the authorization and recording of the transaction.
You could further explain the word ‘authorize’ as “to confirm the sale is within the company’s credit management standard and within the customers credit facility.”
For a new customer, credit control should set up a new account, ensuring that the information provided is sufficient to enable credit control to correctly identify, invoice, and control the debtor account.
Identification of Customer Accounts
The major cause of queries (queries cause late payment) in credit control is the lack of the required standard of information to identify debtors easily. Be it, incoming, or outgoing correspondence or in-house communication.
A clear alphanumeric system is a favoured option. For example, ACME Limited could be identified as ACM01. The ACM being the first three numbers of the company’s name: with the 01 representing the first customer on your books with the letters ACM. If a new company wanted an account with you who were called ACME Glass. Limited you would give them an account number of ACM02. You could add on a couple of letters or numbers on the end to signify the type of industry in which the customer trades, or to identify any in-house reference.
You may wish to add letters such as ‘N’ (ACM02N) which indicates that the customer is ‘N’ for ‘New’: Or ‘C’ for ‘Caution: ‘H’ for on ‘Hold’, etc. These letters are called *’flags’. They indicate special circumstances: no flag means all is in order.
If you have the capability to run a computer database, and the size of your company merits such time and resource, then you need to make the best use of all data available. There are many companies that can give advice as to what data to record and how best to use it for your company’s growth. However, if your only concern is to identify your customer, keep it simple!
If you wish to set up a database of your customers/debtors, please feel free to contact me for advice and consultancy. I have expertise in this area, and can take you through the process of setting up a database, in say Microsoft Access, that will suit your needs.
The question of identification is a two-way effort. Your customer is likely to have their own set of reference numbers, such as, a supplier number (identifying you), possibly a purchase order number (this is a document sent to a supplier usually confirming the placement of an order, the price, delivery details, special instructions etc.).
With the possibility of so many numbers it is important to have the facility to show all references on your documents: not just on the invoice!
Flags on Customer Accounts
Flags are a very important part of credit management. There are two types of credit accounts.
The first is all of the accounts that owe you money with no reason whatsoever not to pay.
The other types are those with queries, awaiting credit, damaged goods etc. This group must be ‘flagged’ on your system/records to identify them from the first group.
If you do not flag the second group you will expect payment, as well as not being able to identify where your problems are.
If an account has a query put a ‘Q’ before or after the account number:
A ‘D’ for ‘damaged’ goods – a ‘C’ for awaiting ‘credit’ … you get the idea. By looking at the account anyone should be able to understand the current status of the account.