Audit of Internal Credit Control Procedures

Audit of Internal Credit Control Procedures

Posted by Martin Hughes, on February 26, 2020. Tags: , ,

Whilst acting for a client (a national manufacturer of boilers for the domestic market) we noticed that many of the debts being sent to us were either very easy for us to collect, or had simple disputes which really should have been resolved prior to passing them to us.

We discussed the situation with the Credit manager, and we agreed that he would visit his company and carry out an audit of their internal credit control procedures.

It was soon obvious what the problems were.

· There was no query resolution system in place allowing problems to be identified and followed up in a timely and effective manner

· Dunning letters, rather surprisingly, were not despatched to an agreed credit cycle and were to say the least ineffectual in their content

· There did not appear to be an agreed Credit Policy in place regarding returns and in many cases debit notes which had been initiated by their customers

We devised a manual system for him regarding query resolution, as he did not have a software application which would deal with this.

Dunning letters were rewritten with an agreed credit control cycle to escalate the debts.

A procedure was written to identify and deal with the returns and debit notes. This part filtered into the query resolution system.

Not surprisingly, the volume of work received from the client reduced to a trickle. We did, however, retain a loyal client who continued to pass work of a more tricky nature to us.