Good credit control doesn't just happen. Here's how to make sure you have an effective system in place to get paid on time if you don't get paid upfront.
Gather comprehensive information about the customer before taking orders. Confirm details such as:
Provide all the information your customer needs to be able to pay you quickly and easily, such as:
If you are negotiating a credit agreement:
Chase payments as soon as they become overdue. You may want to prioritise high-value invoices first. Start with phone calls and progress to letters when chasing late payments.
On the phone:
If phone calls get you nowhere, send a letter:
If you have to pursue the claim through the courts you stand a very good chance of recovering the debt and the cost of the action if you have followed a robust process and have all your documentation in place.
Businesses are entitled to claim compensation when a debt remains unpaid after the date specified in the contract, or in the absence of a contract, 30 days after the delivery of the goods or service.
It is good practice to state the interest rate you will charge on late payments within your contract and you should charge on while the outstanding debt (including any element of VAT). Be mindful of any restrictions on the charging of late interest including whether this could be seen as a form of penalty.
Decide whether you intend to charge all your customers interest on late debts or just the one or two that regularly fail to pay on time and then forewarn customers that it is your policy to claim interest on late payments.
However effective your system is, it will not be risk free. You should avoid large exposure to any one or few customers. Consider whether any of the following ideas might work for you:
Find out more about our Invoice Finance (Factoring & Invoice Discounting) service.
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