As most experienced business owners know, a sale is only an order until the cash is in the bank. In the current economic climate, getting paid on time on a regular basis for the products or services you have provided, has become increasingly difficult and time consuming. You’ve probably heard all the excuses as to why that invoice has not been paid:
- “we never received that invoice!!”
- “there’s nobody here to authorise it at the moment”
- “it’s on the next payment run”
- “the cheque is in the post”
- “oh, I thought we had paid that”
closely followed by “the dog ate my homework!!”
A common problem is to have a client refusing to pay a large invoice outstanding because of one small query on part of it, or holding back payment on a batch of invoices due to a query on the smallest of the invoices. If this happens can you still pursue the company through the courts to get your money?
The answer is yes you can!! Even if the exact amount due hasn’t been proven, due to small queries, and the client refuses to pay anything, the courts will not look favourably on the client and will back your claim. If the outstanding debt is more than £750, you are within your rights to bring a winding-up petition against the debtor. That’s great news if you already have a debt, but it’s much better to put in place credit control procedures so you don’t get a debt in the first place.
Following this process with ALL new clients may save you a lot of aggravation and stress:
- Complete an account opening form;
- Make the client aware of your payment Terms & Conditions;
- Get the client to sign that they have read and understand them;
- Carry out credit checks on them;
- Agree settlement terms;
- Collect any deposits that might have been agreed with the client for their first order;
- Deliver the product or service;
- COLLECT THE MONEY ON THE AGREED TERMS.
An important part of the credit control process is to be pro-active in chasing the debt and don’t wait until payment is overdue before you start pursuing it. This might include the following process:
- Raise an invoice and send or e-mail it to client;
- Phone them to ensure they have received it and confirm with them that it hqas gone to the correct person;
- Check with them to ensure the invoice is correct and that the service or products were delivered at the agreed price and on time;
- Confirm with them that there are no queries that might hold up payment;
- A week before it’s due phone them again to ensure there are no problems and that it will be paid in line with your payment terms which they agreed to;
- On the day it’s due phone them again to ensure there are no problems and that it will be paid in line with your payment terms which they agreed to.
This process should ensure you get paid on time most of the time. If invoices remain unpaid after the agreed date start chasing immediately following your credit control procedures of:
- Chase up phone calls;
- Reminder letter;
- Final reminder;
- Notice of court action.
Time taken to put in place a robust credit control procedure will be time very well spent, and will make it much easier to keep on top of your invoicing, and will allow you to get paid in line with your agreed terms more often.