Getting your debtors to pay up is a common problem that affects every business in almost every industry and the implications for your operations can be far reaching. Cash-flow management and customer retention are two of the major issues arising from the difficulties of effective credit control/debtor management. The question is: What can you do about it? Carl Lancaster, Peninsula’s Credit Control manager, advises employers of the best way to get paid. If you are a Peninsula client you can speak to one of our Consultants 24 hours a day, 365 days a year. Just call now on 0844 892 2772.
Whilst not every organisation has the facility or resources to be able to implement a tailor-made credit control system, it is within the reach of every business to be able to more effectively manage your debtor situation by following a few simple steps.
Identify your current business terms with your suppliers and tailor your credit control strategy accordingly. For example, if you have to pay your suppliers on 30 day terms ensure that your credit terms are clear and unambiguous and enable collection prior to you needing to pay your suppliers. A failure to address this situation will potentially result in a negative cash-flow situation.
Obtain credit references. In today’s IT driven environment, the use of credit reporting to check new/potential customers is commonplace, however, these reports are only as good at the information provided to the credit referencing agencies. Often this is not always a true indicator of whether your customer is actually going to pay you for your good/services. In addition to these reports it is extremely beneficial to use the “oldâ€ method of obtaining credit references from your customers existing suppliers to find out how valuable your sale will be. Remember, a sale is not really a sale until it is paid for.
Maintain contact at all times. There are many businesses out there who operate on a “he who shouts loudestâ€ basis when dealing with payments. If you do not contact your customers on a regular basis you may find yourself at the bottom of the pile for being paid. This can take the form of letters or statements, but direct contact to your debtor via the telephone will almost always generate the speediest response. The added value to this is being able to address any account/invoice issues immediately.
Be aware of your rights. If a customer refuses to pay your invoices, you are within your rights to take legal action through the courts to recover your overdue amounts PLUS 8% Annual Interest (chargeable daily) and Costs, including late payment charges (Late payment of Commercial Debts Regulations 2002). In short, if a customer does not pay your due invoice within your stipulated credit terms you are entitled to apply/invoice a Fixed Penalty Charge in addition to your invoice (£40 <£1000; £70 £10000) without the need to inform your customer separately, because it is contained within the country’ legal framework. Although there are costs involved in using the courts to obtain payment, assuming your case is not frivolous, you will be rewarded with the full payment of your invoices as well as your costs incurred if are successful. You will be surprised at the number of payment you can receive from customers once they have received a County Court Claim form. The website www.moneyclaim.gov.uk can be used to speed up your claim submission and will assist you in completing the relevant forms. Before using the court to assist your credit enforcement, ensure you consider the cost/benefit implications as defended cases can increase costs significantly so be realistic of your chances of success before embarking.
Follow through. When in contact with your customers ensure that any proposed action on the account, i.e. enforcement, suspension, etc., is actually carried out. This leaves your customer with the impression that you are a professional organisation which delivers on its promises. You can be sure that your customers will be more forthcoming with payments once they know that supplies will not be available if payments are not made.
Remember, the Peninsula Advice Service is on hand to help with any of your employment law issues. Just call one of our employment law consultants on 0844 892 2772.
Carl’s Top 5 Tips:
- Establish contact.
- Stipulate your credit terms.
- Get credit references.
- Know your rights.
- Follow through on your promises.