Key Steps To Managing Slow Payers
There is never a cast iron guarantee that one will get paid on time or even at all, so it is always prudent to take certain precautions before granting credit.
Typical excuses not to pay run a mile long so stay ahead of the game by making sure you pre-empt them and are ready to counteract them.
Some tips on how to avoid and manage late payers……
- If you grant credit to a limited company, make sure the company is solid. A company check costs £5.
- If any doubt before granting credit, get a director's personal guarantee.
- It is always wise to try to get a couple of trade references where possible.
- Have good credit control procedures in place and ensure they are acted upon. Don't allow arrears to build up. Monthly statements, red letter reminders and follow-up phone calls are all effective in getting debtors to pay promptly.
- Always get the debtor to agree a date as to when you can expect payment. Follow-up immediately if the payment is not received when expected.
- Don't allow room for age old excuses such as the cheques' in the post. Ensure your clients have access to on-line banking and agree payment by either BACS or CHAPS.
- Insist that any issues with the products/services supplied are brought to your attention within an agreed timeline – not three months later after you sent the third overdue statement. Insist also that issues are stated in writing immediately and endeavour to get them resolved as soon as possible. Keep an audit trail of all communication.
- Consider if you can really afford the risk in issuing further credit while there is a current debt outstanding.
- Consider a repayment schedule where appropriate. Follow-up immediately if the payment is not received when expected.
- While it enhances a client relationship to have some sympathy with their cash flow issues, their cash flow is not your responsibility, and besides you have your own to worry about. Remind the client of your agreed payment terms, point out the additional time they have already had and insist on an expected payment date.
The main thing to remember is that if a customer does not want to co-operate or if you smell a rat, take precautions to protect your own business. Chasing debt is business – it's not personal!
For free initial advice or a general discussion on how RCC can provide your business with effective credit control solutions, please contact us on +44 (0)20 8202 3364.