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Steven Renwick

06 Sep 2016

Credit Control Vocabulary explained

Not everyone is an accountancy guru who understands the terms that crop up in the accounting lexicon, so we thought we’d take time to provide an explanation of those most commonly used.

Credit Control vocabulary explained:

Accounts Receivable:
Payments outstanding for goods or services provided on trade credit (payment terms).

Average Debtor Days (ADD):
How many days on average your invoices are outstanding.

County Court Judgments (CCJ):
Formal court decision that a business owes a creditor money. CCJs are a drastic way of getting your money back, therefore, court action should only be taken as a last resort.

Credit Check:
A check of the creditworthiness of your existing or future clients to determine the likelihood of your clients fulfilling their financial obligations.

Credit Limit:
The maximum amount of credit that a financial institution or supplier will extend to a debtor for a particular line of credit.

Credit Rating:
An evaluation of the comparative creditworthiness of a debtor, especially a company.

Days Beyond Terms (DBT):
Indicator of how many days payments are outstanding beyond the agreed payment terms.

Invoice Factoring:
A financial transaction to accelerate the receipt of money against outstanding invoices. Businesses sell their accounts receivable to a third party at a discount. The third party then agrees the credit limits and collects the payments.

Working Capital (WC) Current Assets – Current Liabilities:
An indicator of your operational liquidity. In other words, it is the cash available for your daily operations. Working capital should always be positive as negative working capital highlights severe short-term liquidity problems. 

READ OUR FULL WHITEPAPER:

Credit Control 2.0: The Ultimate Guide to getting paid faster 
(including free templates, the ultimate credit control approach, and more)

ABOUT SATAGO

  • Satago have a different approach to invoice finance – funding invoices from when they are raised, up until when they are due (and sometimes for even longer, up until 60 days overdue). This ensures as much value of an invoice as possible stays in the pockets of SMEs, making their cash-flow more reliable, reducing the need for reliance on funding and keeping costs to a minimum.
  • In real terms, Satago will advance up to 85% of the invoice value – for a single invoice or several - immediately transferring the amount to your bank account. The fee is usually 2-4% of the invoice value financed per 30 days. The fee is dependent on a number of factors such as your credit risk and that of your customer when we buy the invoice.
  • The Satago all-in-one cash flow solution is an add-on to your existing accountancy software, and means you can be equipped with effective finance solutions to cover the funding gap – PLUS a proficient credit control strategy including a cutting-edge debtor tracking system and integrated credit risk data, to help avoid the issue of late payments overall, cutting down the time chasing payments