16 Sep 2020
In business, cash is king. You need it to pay your suppliers and salaries, invest in assets and plan for growth. Managing your debtors so that you get paid on time can therefore be critical to the survival of your business, particularly in these worrying times.
Unfortunately, every company has its share of slow-paying and non-paying customers so it is worth considering instructing a debt collection specialist to avoid cashflow becoming a problem and to ensure you get paid what you are owed.
Before you get to the stage where you’re having to worry about debt collection, however, there are plenty of simple things you can do to get the cash flowing. We’ve suggested some tips here:
Which payment terms you set depends entirely on your business, your service and your customers. These days, it is acceptable to agree 7, 10 or 14 day terms, but some businesses can ask for cash on delivery or even pre-payment. If, for whatever reason, you fail to agree payment terms, the Late Payment of Commercial Debts (Interest) Act 1998 (the “Act”) inserts the right to be paid 30 days after delivery of the goods or services in business to business transactions.
Staged payments should be agreed at the onset of any large contracts where there are ongoing obligations. This will not only help you and your customer manage cashflow, but will also allow you to deal with any disputes with the contract as they arise, rather than at the end, where your customer may try to withhold the whole payment.
The Act allows you the automatic right to charge compensation and interest on any late payments, together with the protection of giving you the automatic right to pursue any costs you incur in chasing a late payment of business to business debts. Do not be afraid to use your legal rights to compel someone to pay on time, or punish someone for paying late.
Find out what will make your customers’ lives easier and include the information they need to make paying your invoice as simple as possible, whether that’s including a job number, customer reference number or detailed descriptions of the product or service. Sometimes payment is delayed simply because the invoice has been sent to the wrong person, or wrong office, so make sure you know who deals with payments at your customer and get their direct contact details.
Make your payment options clear on your invoices and offer a variety of payment options that are suitable for your customer base.
Keep your reminders friendly but firm; have a system for regular follow-up and if you have not heard back or received payment after the first reminder, do not be scared to pick up the phone. A quick chat might be all that’s needed to get the payment made.
The less time you spend chasing payments, the easier it is to keep on top of things. Choose software that automates the process, turning quotes into jobs, jobs into invoices, syncing with customers’ details and sending automated reminders.
At Harding Evans we are skilled in debt collection strategies. We take a sensitive but determined approach, understanding that sometimes debtors just need to be handled correctly to get the best outcome for everyone. For many debtors, just getting a legal letter is sufficient to make them pay their bills while some difficult debtors will do anything to avoid paying the debt.
Handling difficult debtors requires patience, skill and perseverance. It is important to remain firm, professional and focused throughout and keep a tight rein on the conversation, always bringing it back to the purpose of the call or meeting – to collect payment or get a commitment for the payment. If the debtor is coming up with excuses as to why they cannot pay, we will interrogate those reasons, whilst also keeping an open mind and working with debtors who genuinely cannot pay and just need more time.
If you are dealing with your debtors yourself, make sure you keep a record all communications from the start as this will help if you get to the stage of having to resolve a dispute.
If after all best efforts, the debtor still will not pay, remember that you are within your rights to issue a Claim against them. Sometimes, the threat of litigation will be enough to encourage a debtor to pay, but if not, make sure you follow up the warning with action as this will ensure the debtor takes collection proceedings seriously and actually pays what they owe.
Harding Evans has a team of experienced specialists in Debt Collection, including Solicitors and qualified bailiffs, delivering a service few other law firms can match. We understand the importance of providing a proactive service and draw on existing laws that are designed to protect creditors from bad debtors to ensure the costs of our services are passed on to the debtor. Unlike some debt collection agencies, we are an experienced commercial law firm that understands all your legal rights and all routes available to you.
Get in touch with our expert team by clicking here
Harding Evans is a trading name of Harding Evans LLP, a limited liability partnership, registered in England & Wales (registered number: OC311802), authorised and regulated by the Solicitors Regulation Authority (SRA number: 419663).