Top tips to keeping on top of late payers and maintaining a healthy cash flow
Don’t just sit back and wait. One bad payer can ultimately end in the demise of your business.
Often, we in the Debt Recovery team at Royds Withy King see clients leaving invoices outstanding for far too long. Then when it comes to taking legal action, their records are not as clear as they could be in terms of who they are trading with and what they have agreed to supply, which ultimately can affect their debt recovery prospects.
Having good credit control procedures in place that chase customers the moment the invoice becomes due and arrangements in place for those that linger to be efficiently pursued through the Courts is vital for the maintenance of a healthy cash flow.
However, before you even get to that position, there are steps that can be taken to help with the recovery.
Know your customers
It is very important at the outset of any transaction, whether as a new customer or an existing customer that it is abundantly clear who you are trading with and what you are being asked to supply. Proper searches should be carried out on the company or individual you are involved with and good evidence of their financial ability to pay, where they are based and, when dealing with an individual from a company, their position in the company. Clear contractual information including acceptance of the offer made, signed terms and conditions of business and an audit trail of all discussions had during the contract kept. This is particularly important if any changes are made.
Make sure your terms and conditions of business are top notch
Your Ts & Cs should provide you with as much protection as possible in the event of non-payment including interest and retention of title clauses where goods are involved.
The new Consumer Rights Act 2015
For those contracting with Consumers, the new Consumer Rights Act 2015 came into force on the 1 October 2015, amending and replacing eight existing pieces of legislation including the Sale of Goods Act 1979 (as amended), the Sale of Goods and Services Act 1982 (as amended) and rules on unfair contract terms as well as introducing two new areas of law surrounding digital content and a 30 day statutory right of rejection for defective goods.
It is very important that your terms and conditions are compliant with the Act; for example, that they include the new Alternative Dispute Resolution requirement. A failure to do so can make them unenforceable and lead to enforcement steps being taken by Trading Standards.
When you have late payers, take steps to make sure that your customers know that you require payment on time and that legal action will be taken. Being a little tough on one occasion might avoid it happening a next time.
Calculating interest and late payment compensation early (whether you are entitled contractually or under the Late Payment of Commercial Debts (Interest) Act 1998 which applies to business to business cases) and informing your customer can channel minds.
In the absence of payment and the exhaustion of your credit control procedures, take legal steps promptly so that it is a seamless addition to your own procedures.
Our Debt Recovery team can provide this service for a small initial fixed fee for writing a letter of claim and limited percentage recovery fee upon successful payment. In over 65% of cases in the last 12 months this letter of claim has done the trick, with a further 20% or more paying upon issue of proceedings.
Want to know more? For more information and details of our fees visit our debt recovery page or get in touch with the team.