Credit control top tips (part 1): Preventing late payment
19 August 2008
Bookmark and Share
   
Email article : Print article : More articles like this

The late payment of business debts is one of the biggest problems faced by businesses in Britain. No business, large or small, can afford not to take credit control very seriously. Read our hot tips to ensure you get paid on time.

The statistics on late payment are scary:

  • Poor payment practice costs UK business £20bn every year
  • The total of late payments increased by £2.6bn to £18.6bn over the last year
  • Small firms each owed an average of £30,000 at any one time
  • 1 in 4 businesses go insolvent due to invoices being paid late
Make your terms clear
Agree payment terms at the order stage and have those terms printed on relevant documents such as invoices. Terms should include any credit period and details of interest charges on overdue accounts. Don't forget all businesses have a legal right to claim interest from late-paying customers.

Consider credit checking potentially large customers
An online credit rating can be on your desk in minutes and cost from £10 upwards. Consider taking up credit references.


Make your invoice clear
An easy-to-understand invoice will encourage customers to pay more quickly. Make sure, in particular, that you include a detailed description of the goods/services, a reference to the order number and that you send the invoice to the right person.


Invoice on time
Send the invoice out immediately after the goods are sent or the service is completed. Don't forget that many businesses simply don't pay invoices until they receive a statement.


Create a system
Set out in writing a timetable you feel comfortable with for chasing unpaid bills - and stick to it. You might, for example, choose to adopt a timetable along the following lines if you have terms of payment within 30 days:
  • send out invoices immediately
  • send out a statement to arrive on day 27
  • send ‘low' impact letter on day 33
  • phone the customer on day 35
  • send ‘medium' impact letter on day 38
  • send ‘high' impact letter on Day 41
  • send solicitor's seven-day letter on Day 45

Click here to read part 2 of Tim Bishop's credit control tips.

About the author
Tim Bishop is a partner at solicitors Bonallack and Bishop – whose services include a nationwide specialist debt recovery department offering a free solicitor's seven-day letter.
Visit www.bishopslaw.com for more information, including free downloads on avoiding employment tribunals, avoiding identity theft and a free downloadable recorded seminar on credit control – or telephone 01722 422300.