By Chris Else, Managing Partner at Else Solicitors
firstname.lastname@example.org, 01283 526200
Businesses that are affected by late payments and bad debt are being encouraged to review their credit control procedures by a leading expert. Chris Else, Managing Partner at Else Solicitors, has decades of debt recovery expertise including experience with a number of high profile UK companies.
As well as acting on behalf of businesses to recover payments and debt, Chris also advises companies on how to minimise future risk through improved credit control procedures. Commenting on this, Chris said: “We manage debt recovery for a large number of clients, and that is a successful service we provide through our dedicated Debt Recovery Department. However it is also important work with our clients to mitigate the likelihood of debt in the first place. And this starts with their credit control procedures. We now offer a free credit control review service for businesses and organisations, which includes a full check on existing procedures and advice on how they can be improved.”
Below are some top tips from Chris in relation to credit control procedures. If you want more information on any of these, or to discuss a free review or debt recovery, then please contact him directly on email@example.com or 01283 526200.
- Looking at the way orders are obtained: The starting point is to know exactly who your customer is and also to know that they are able to pay for the goods and/or services supplied. Was the order subject to your terms and conditions of sale and were your terms incorporated into the contract? In other words, can you rely upon your terms of sale? Do you have systems in place to correctly identify your customer and also to recognise the credit risk if you are providing credit terms?
- The credit control process: This starts at the point of sale and knowing who you are dealing with and upon what terms you wish to deal with them. The standard procedure includes:
- Send an order acknowledgment form immediately after the order is placed, which includes your terms of business.
- The order will be met with the supply of goods and/or services and an invoice sent.
- Following the invoice the normal procedure is to send a statement of account after 14 days and to call the customer to confirm the payment date assuming terms are 30 days from date of invoice.
- If payment is not received by the payment date then the first chasing letter would be sent perhaps suggesting this is an oversight.
- After a further seven working days a more assertive letter would be sent stating that you may be looking to charge Statutory Late Payment Interest and Administration fees pursuant to the Late Payment of Commercial Debt Regulations. You could offer to waive these fees waiving if payment is made immediately.
- After 14 days a ‘Letter Before Action’ is sent.
- If this still doesn’t result in payment then you need to consider legal action.
- Common mistakes in the credit control process: We have seen a number of common mistakes that businesses make when trying to get payment and chase debt. These include:
- Not knowing your customer and being aware of exactly who your customer is.
- Failing to chase unpaid debt.
- Not having a strict chasing system in place with one person responsible for it.
- Allowing sales staff to dictate the business relationship. If a customer has not paid do you still want them as a customer?
- Not taking decisive legal action quickly enough; getting in first is important.
- Some examples of mistakes that have cost businesses money:
- Carrying on normally when you haven’t been paid monies due. It is obvious that this builds up the debt but it is a common error which compounds the problem.
- Not taking decisive action soon enough. If the debt is >£750 and the debtor is a limited company it should be a standard process to threaten the debtor company with Liquidation. This is an aggressive tactic but if you do nothing and others receive payment whereas you do not your company could be at risk.
- Not establishing whether there are problems with the supply of goods and/or services early enough. Credit control procedures can flush out complaints and issues affecting payment.
- Key points to remember and embrace:
- Have a credit control system in the first place!
- Review it and measure the success.
- Ensure your terms of business are fit for purpose. Terms and Conditions of Sale must stipulate payment dates and that if one payment is overdue all invoices become immediately payable.
- Communicate with your customers and have a relationship with them.
- Take action early if payments are not made, don’t bury your head in the sand.
- Be organised and ensure sales staff do not make promises which will not be kept and that they adhere to the business procedures for setting up customers and transacting sales.
Else Solicitors have a dedicated team with a wealth of experience helping businesses with their credit control and also recovering bad debt. For more information and an initial discussion please contact Chris Else at Else Solicitors via email or phone: firstname.lastname@example.org / 01283 526200.