Effectively managing cash flow is essential for all businesses but credit control shouldn’t start once you have an outstanding invoice, instead it should begin the very moment you make a sale.
Commercial solicitor, Sara Beaumont shares her top tips on how to reduce the risk of bad debt helping you get paid quickly and efficiently.
Know your debtor
You should be collecting as much evidence as possible about your customer at the outset asking them to complete a credit application form and undertaking credit checks.
Set a credit limit
The information you have obtained about your customer through credit checking should assist you in setting an appropriate credit limit. Don’t be pushed into agreeing a higher credit limit with your customer if the risk is too great and make sure that the level of credit is regularly reviewed to ensure credit limits aren’t exceeded without paying off existing invoices first.
Send out timely invoices and reminders
Invoices and reminders should be presented formally and the information they contain should be accurate. Basic errors include; putting the incorrect address on an invoice and failing to stipulate when payment is due.
Telephone your debtor
Picking up the phone can often be the most effective way of getting paid. Before making that call make sure that you have all the required information available as the debtor may ask questions about the date of the invoice etc. Always be professional and polite when making calls and never end the call without the other party promising payment. If required, follow up with another call to ensure that the debtor keeps to their word.
The longer that a debt is left to languish, the harder it will be to recover. There is little point in sending numerous letters to the debtor in the hope that they will eventually pay. Following an invoice, issue a reminder, follow-up via a phone call and if payment has still not been received then you should seek legal advice as soon as possible.
Our debt recovery team is on hand to provide support and advice in relation to all debt recovery issues and can be contacted here.