2020 will forever be clouded by coronavirus, yet it is also the year of entrepreneurial spirit.
Despite being faced with a raft of draconian government restrictions, many companies are seizing the opportunity to diversify and build new income streams. Equally, thousands of business owners are now focusing their attention on improving and securing their finances.
So whether you are a start-up, or well-established in business, here are our top 5 tips to help you avoid the accumulation of bad debt.
1 – Get a reference
It is essential that we get to know our customers before entering into business. In order to avoid the build-up of bad debt, investigate your prospect’s credit rating prior to services being delivered. A Companies House listing offers a good indication of both a stable leadership and the reliability of the organisation in question.
2 – Set out your terms
Customers need to have a secure understanding of your terms and conditions.
Your company’s terms and conditions should include listed penalties for late or non-payment. Potential customers also need to be aware that late payment compensation can be applied to any late payment, so it remains in their interest to address invoices promptly. Remember, only offer credit terms that work for you. If you cannot afford them, do not set them.
Ensure your terms and conditions are checked by a legal professional. We advise stating terms and conditions on the back of invoices. Providing written terms and conditions ensures clarity at all stages of the transaction.
3 – Keep an eye on existing customers
Having knowledge of key changes within your customer’s business is essential, if you wish to avoid the accumulation of bad debt. Through a thorough and extensive credit rating check, you will be able to ascertain if any changes to the business’s structure could have a negative impact on your finances moving forward. Equally, if you are aware of their trading patterns, and seasonal finances, you are then able to speak to them from a position of power. This information may also be imperative if payment is ever required prior to supply.
4 – Be quick to invoice
Once the service or goods have been provided, send out an invoice as quickly as possible. Remember to include all relevant terms and conditions. Electronic trails are easier to track, so we advise sending invoices via both post and email. Set up electronic mail to ensure the customer acknowledges receipt. And to incentivise quick and early payment, why not offer a small discount for invoices paid within a certain time frame?
5 – Take action
Your late payment terms should not come as a shock to the client. Be unwavering in your approach to late payment and stick to your process. For example, conduct a telephone call with your point of contact on day 3, or send a reminder letter on day 6. After your arranged time frame, send an additional invoice under the late payment compensation act. At this stage, avoid continuing to provide goods or services to any client who has outstanding payments.
If the client faces an unforeseen predicament, consider a staged payment plan, but only do this if you are financially able to do so. We would also only recommend this course of action for loyal and regular customers.
If you relax your approach to late payments, then some of your clients will take advantage. Sadly, there are many dishonourable individuals and businesses out there. So as soon as you start to accept late payments, they will become the norm.
Need help?
Dealing with bad debtors can be extremely stressful. Battling to make contact with late-paying clients can have a significant impact on your own mental health. Every year, thousands of individuals and businesses write off debt. They simply give up.
But if you want to collect debt easily, quickly and without hassle, then we are here to help. Cobra Financial Solutions are specialist debt collectors, working right across the United Kingdom. Our approach to debt is simple: no-nonsense and no excuses.
We deal with your client, so you don’t have to. In 2019 alone, we collected over £14 million for our clients, with a success rate of over 90.7%, an industry high.
So if you are sick of dealing with your debtor, then trust the experts to collect your money. Contact one of the Cobra team today on 0151 526 4222, and let’s get your money back in your pocket. Where it belongs.
