Managing your cash flow and minimizing bad debts is essential, even more so in these challenging economic times. Many businesses do not pay proper or prompt attention to their credit control which can often lead to their downfall.
Eric Holt, Head of Credit Control and Debt Recovery at Coles Miller Solicitors Dorset, advises businesses on how to keep abreast of their finances and their debtors.
Step one is to know exactly who your prospective customers are. A staggering percentage of Creditors do not know the legal status of their customers. It is important to develop effective cash flow management and ensure procedures are in place to encourage customers pay on time and to mitigate the risk of bad debt. Having good processes in place such as making certain that your invoices are properly addressed to the correct person, is obvious but often overlooked.
Secondly, businesses also need to understand the financial health of their customers and review and if necessary adjust credit limits. Before extending credit at the very least some basic credit checks should be carried out on a customer, whether it is an individual or a business. Many Creditors fail to gather even the most basic information on the customers, including details of where they live.
Whilst implementing credit checks has some benefits in preventing debt, it does not guarantee that customers will pay their accounts on time. The onus is on you to have a clear and solid accounts process in place. This includes: -
- Establishing and communicating clear credit terms at the outset with which the customer agrees to comply.
- Ensuring that work is completed or that goods are supplied on your terms and not theirs.
- Issuing invoices promptly and following up promptly if they are not paid on time.
- Consider communicating with customers to identify problems before accounts become overdue.
- Understand and instigate prompt action against customers as often it is the first in line that gets paid.
Many businesses simply don't have the depth of knowledge or the time to obtain the best results. Don't be afraid to enlist the help of a reputable Debt Recovery Service, such as that provided by Coles Miller, and can be enlisted way before court proceedings ensue. Debt Recovery services provided by law firms are often very cost effective and should not be viewed as a last resort. Their expertise can mean the difference between being paid and having to write a debt off.
Eric also explains that "many creditors still do not realize that they can often recover substantial interest and compensation towards their costs, as well as the debt itself if they have to chase late payers. Knowing how and when to use the law to recover a debt make all the difference."
For further information contact Eric Holt on 01202 338844