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Extending credit to clients is a common business practice, especially in B2B sectors. While it can help build strong relationships and encourage repeat business, at Hurley Accountancy we believe it also carries significant risk. Late payments — or worse, non-payment — can seriously damage your cash flow, disrupt planning, and even jeopardise your ability to meet your own financial obligations. That’s why managing client credit risk must be an active, ongoing process — not a reactive measure when problems arise.

Know Who You’re Dealing With
The first step in mitigating credit risk is thorough client vetting. Conduct credit checks using reputable agencies and request trade references before offering credit terms. Pay close attention to their payment history, current liabilities, and overall financial health. It’s also wise to assess whether the client’s business model aligns with your payment expectations. A client who is highly seasonal or dependent on volatile markets may pose more risk.

Set Clear, Consistent Credit Terms
Clarity is key when it comes to credit agreements. Be upfront about your terms — including payment deadlines, penalties for late payments, and any discounts for early settlement. These should be documented in writing and agreed upon before any goods or services are delivered. Avoid offering overly generous credit limits without a proven payment track record.

Monitor Payment Behaviour
Managing credit risk doesn’t stop once terms are agreed. Ongoing monitoring is essential. Use your accounting software to flag overdue invoices quickly and identify patterns of late payment. If a previously reliable client starts to delay, it could be a sign of financial strain. Address any issues early through polite but firm communication.

Strengthen Your Collections Process
A proactive collections strategy can reduce risk and improve cash flow. Issue invoices promptly and follow up consistently. Automate reminders where possible, but don’t underestimate the impact of a personal follow-up call. In persistent cases, consider working with a collections agency — but weigh the reputational impact first.

Consider Credit Insurance or Factoring
For larger or higher-risk clients, credit insurance can offer peace of mind. Alternatively, invoice factoring — selling your receivables to a third party at a discount — can improve liquidity and transfer some of the credit risk away from your balance sheet.

Being proactive about credit risk isn’t about mistrust — it’s about protecting your business. By implementing strong credit controls and maintaining open client communication, you’ll build financial resilience while maintaining positive commercial relationships.

If you would like to discuss your business needs. Call Hurley Accountancy on 0238849722 or email imelda@hurleyaccountancy.com

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