Recent research shows that up to 1 in 4 businesses go insolvent every year due to invoices being paid late. Small firms can be particularly vulnerable with estimates that each is owed an average of £30,000 at any one time. No business, large or small, can afford not to take credit control very seriously – especially in the current economic climate. Here are a few tips to put into action straightaway:
- Make your terms clear. Agree payment terms at the order stage and have those terms printed on relevant documents such as invoices. Terms should include any credit period and details of interest charges on overdue accounts. Don’t forget all businesses have a legal right to claim interest from late paying customers.
- Consider credit checking potentially large customers An online credit rating can be on your desk in minutes and costs from £10 upwards. Consider taking up credit references.
- Make your invoice clear An easy to understand invoice will encourage customers to pay more quickly. Don’t forget to include a detailed description of the goods, a reference to the order number and the agreed payment date.
- Chase outstanding bills ASAP This is perhaps the most important tip of all. Always concentrate on the largest debts first, customers you guess may be in financial trouble and older accounts. Keep a log of all your calls – date, time, who you spoke with and what was discussed. Do not be embarrassed about requesting payment – never forget that it is your money. Phoning is one of the fastest ways to persuade late payers to pay up – never call on Monday or Friday.
- Deal with excuses Always be sceptical of excuses – they can often be simple delaying tactics. Put these customers high on your chasing list. Have a standard policy on dealing with common excuses such as:
- “I haven’t received your invoice” – check the invoice address is correct and immediately e-mail another copy to the person you spoke to. Phone to check it has been received and ask when you can expect payment
- “I’ll deal with it shortly” – ask when
- “The cheque’s in the post” – ask for the postal date and cheque number
- Send 7-day letters A 7-day letter is the first stage of the legal process; you cannot sue unless you have sent that person such a letter. Some businesses have a policy of not paying until they receive such a letter. Consider appointing a specialist debt recovery solicitor to send 7-day letters on your behalf. Letters from solicitors are often taken much more seriously and can produce significantly improved results.
- It’s good to talk Maintain a positive and personal relationship with your customers. You are more likely to get the results you want if you adopt a friendly approach. Explain that you value their business and have been advised to take legal action but only want to do so if there is no alternative. Speak to the managing director or finance director of the business, or another decision maker if possible.
- Thank customers who pay on time
Whatever you do, don’t delay. Deal with unpaid bills as soon as possible. Also make sure you have a written credit control system in place and that you use it.
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