Overdue payments from customers can often be an unnecessary burden on your time. As a business you will want to improve cash flow but not upset a customer by pressing too hard for payment.
Here are some tips to assist you in managing those bad debts
1. Know your customer
Even if your customer relationship is new or well established, credit reports are essential. They are quick, cheap and enable you to be fully informed of any financial changes with your customer, allowing you to decide whether to do business with them.
Keep an ear to the ground in the business community. It often is the case that another business has had particular problems with a customer which has now come to you.
2. Have terms and conditions in place
By having terms in place you can manage the relationship with your customer. In the terms you can decide on payment dates and when additional interest can be applied.
3. Invoice promptly
Producing an invoice late will not do your cash flow any favours and the customer may have forgotten what the invoice relates to. It is good practice to invoice promptly after the service has been completed.
4. Diarise and chase
Most of us at some point have invoiced a customer and forgotten about it. It is really important to diarise the date in which payment is due and to have in place a plan of action, either a call to the customer or a reminder letter.
5. Know when to take action
So you have called a dozen times and wrote several letters and still you have not been paid? It is important to decide when to take further action. The time limit for bringing a claim for unpaid invoices is 6 years from the date of the invoice. It may well be resolved with a letter from a Solicitor requesting payment or you may have to issue a claim for money in the County court (for claims up to £10,000) or in the High Court (for Claims over £25,000)
