Welcome to the first of our regular blogs which we hope that you will find useful and informative.
I am going to kick off on a subject that is topical for many. There has been plenty of client feedback in recent weeks suggesting that the credit crunch is beginning to affect local business. Fewer sales, higher costs and decreased orders have all been mentioned along with the number one complaint: unpaid invoices. I am in no doubt that there will be challenging times ahead and that firms need to take action on this subject now whilst time is on their side.
A good start would be to review your credit policy – or if you haven’t got one then to create one!
Here are a few tips with regard to the content of a credit policy. There cannot be a ‘one size fits all’ content, but I would generally recommend that you:
- Establish the true identity of each client;
- Consider personal guarantees from directors of limited companies;
- Do a credit check on both new and existing clients;
- Set (and revise) credit limits;
- Have an alert system in place for clients approaching set limits;
- ‘Down tools’ if credit limit is reached;
- Have a reminder system in place for unpaid debts;
- Ensure that the client is aware of your payment terms;
- Use third party involvement for debt collection;
- Eliminate common reasons for disputed invoices;
- Don’t give clients ‘surprise’ invoices;
- Be ready for, and overcome, common excuses for non-payment;
- Try to get all clients on a standing order / direct debit scheme
(mutual benefit);
- Get to personally know the person responsible for paying your invoices;
- Charge interest on overdue invoices;
- Offer incentives for prompt payment;
- Investigate the causes – are your clients satisfied?
- Look at the worst offenders and arrange a meeting to discuss; and
- Do not be afraid to commence court proceedings to recover debts
(as a last resort)
Clients who are slow to pay are using up more of YOUR resources including your time and your money. Do not allow your clients to effectively use your money for unsecured and interest free borrowing. Put a policy and a system in place to ensure that your invoices are paid in time - this will result in increased cashflow, better relationships with your clients, reduced bad debt resulting in increased profit, and frees up lost time from credit control work. If a good policy makes the difference between being overdrawn and in credit you will also benefit from interest received rather than bank charges paid.
Remember – A sale is not a sale until the money is in the bank.
If you would like to discuss the above further then give me a call.
Comments 5
I have a customer who owes me for an invoice dating back to March - how can I enforce this through the courts?
Thanks
Posted 08 Aug 2008 at 9:13 pm ¶Your blog is interesting!
Keep up the good work!
Posted 17 Aug 2008 at 1:00 pm ¶Dean
Depends on whether you have followed the protocol approach, if ther debt is disputed, how much it is for, has the debtor got sufficient assets to enforce and numerous other factors.
Give me a call if you would like to discuss and we can go through your options.
Regards, Jason
Posted 20 Aug 2008 at 12:47 pm ¶Ready to argue with the themes of education-all. All the same, you can very well write about it
Posted 06 Nov 2008 at 1:47 am ¶Argue away - always open to debate!
Posted 12 Nov 2008 at 10:09 am ¶Post a Comment