Debt Recovery: “Sales Prevention Team”

Credit Managers and Credit Controllers often feel that their role is sometimes undervalued within business. They have the unenviable job of recovering payments which are contractually due, a role which is often taken for granted.

Credit Controllers however, are an essential cog in the process that keeps businesses turning. Without them, cash flow (the back bone of every business) dries up and the business may fold. Whilst following a strict process can be a frustrating tick box exercise for the sales team who are trying to get a deal over the line, in reality without cautious risk analysis, bad debts may ensue causing a conflict of interest between the sales team (pushing to sell the goods and service) and the control team.

The day-to-day duties of the Credit Controller are varied but tend to include;

  • Managing the debts of creditors
  • Ensuring timely payments are made
  • Processing incoming funds
  • Reconciling invoices
  • Resolving account queries and
  • Managing debt recovery.

The simplest way to be effective in your credit control process is to have water tight agreements in place from the off. When a supplier agrees to sell to a customer, both parties are entering into a contract which has legal consequences. A contract does not have to be written to be binding BUT verbal contracts leave room for doubt. Always ask customers to sign a written contract or order confirmation with clear payment terms before goods or services are supplied.

Our top tips to make sure your credit controllers feel like they are supported.

1) Get the facts right…

  1. Ensure the customer’s contact details are 100% correct
  2. Identify the order number
  3. Specify clearly the goods or services being provided
  4. List the price for each item excluding VAT
  5. Identify the total price excluding VAT
  6. Include a clause stating that VAT will be added at the going rate
  7. Identify anticipated delivery dates or schedules. Ensure you get signed and dated delivery notes or certification statements for all goods or services supplied.
  8. Identify dates for invoicing, issuing of certificates and similar

2) Make sure your customers are aware that providing of good or services are subject to all client agreeing to the business’ universal terms and conditions. The make sure they sign your terms and conditions before goods or services are supplied. Any amends or changes must be documented and kept on file. This will prove paramount should non-payment issues become an issue.

3) Make sure your universal terms and conditions are available for your customer at all times via the company website.

4) Terms and conditions should include a section relating to the length of the credit period (usually 30 days but you may wish to alter this for high risk customers to 7-14 days).

5) Late payment charges. According to the Late Payment of Commercial Debts Regulations 2002, businesses can automatically claim interest on overdue debts owed to them by businesses and public sector organisations however, suppliers are advised to insert a clause to their terms and conditions advising customers that interest will be charged on overdue invoices.

6) Retention of Title. Goods that are supplied and clearly identifiable as being provided by said supplier it is advisable that a condition of sale is applied under which the goods remain the property of the supplier until the customer pays for the goods in full. This means it is more likely the goods can be recovered should the terms and conditions be broken by the customer.

7) A short period of ‘inspection of goods or certification of works done’ should be provided which will put a stop to unnecessarily delay in the ability to press for payment.

8) Identify the process for resolving any payment disputes including putting the customer on notice of arbitration or mediation.

9) Always check what you’re signing. Disputes can occur when the supplier signs the ‘customer’s conditions of purchase’ which can be found on the reverse of a ‘purchase order’. You should also sense check customer’s terms of business on their company website for adverse agreements.

10) To be extra cautious with high risk customers you can also:

  1. Request part payment upfront
  2. Insist on Third Party Guarantees – meaning if the customer defaults on payments – the guarantee becomes liable to pay the costs.
  3. Offer a discount as an incentive for early payments

By ensuring your whole team follow a strict process the credit controller can rely on contracts to keep the handling of late payments professional. A break down in process can lead to confusion, loose agreements and therefore messy business and that in turn can ruin relationships with your customers, risking any hope for repeat custom.

Else have an expert debt recovery team who can help you recover monies owed to your business and offer a free review of your business’ terms and conditions or credit control procedures, if you would like more information please email or call the office on 01283 526 200 for an initial no obligation, free of charge call.

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