Better Credit Control Practices
All businesses experience bad debtors. There are usually 3 types of debtors:
- The slow payers who can pay but prefer extended payment terms;
- The disputers whose aim is to obtain a credit note to reduce their indebtedness;
- The insolvents who cannot pay their debts and are waiting to be either made bankrupt or for a winding up order to be made by the court.
The majority of debtors are usually slow payers and prefer to wait as late as possible.
For any business to survive, cash flow is key. Credit control teams should work closely with the sales and marketing teams to ensure suitable credit checks are completed before any new customers are engaged and credit is given to new customers.
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Top Tips to be more credit control savvy:
- The sales teams should check the identity of the customer. Is it a limited company, sole trader or a partnership? Complete a credit search. Obtain the companies last annual accounts from Companies House. Is the business profitable, does it have cash?
- If the customer is a newly formed company consider ways to minimise your financial risk such by taking upfront payment with order, taking a deposit, and obtaining a personal guarantee from a director.
- Ensure your written terms and conditions are incorporated into your contract with your customer.
- Offer shorter payment terms for new customers.
- If payment is late, send an internal letter seeking payment followed by a telephone call. If that is not successful you should consider terminating the supply of your goods and services until payment is made, subject to your terms and conditions allowing to do so. Your terms and conditions should allow you to terminate the supply of goods and services for non payment of invoices.
- Ensure you have retention of title clause and no set off clause for disputed invoices incorporated into your terms and conditions.
Talbots Law specialise in advising on credit control and debt collection procedures. We can offer fixed fees for recovering your debts.
We can send an initial letter before action swiftly and issue court proceedings if necessary so that you are ahead of the queue when it comes to debtors paying your invoices.
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