Managing Business Debtors
Non-payment of debts and late payment of invoices can cause a cash-flow nightmare for any business, large or small. Going into a time of economic uncertainty and with news of long-standing and well-known companies closing, most businesses will be looking at their own debtors and trying to manage their cash-flow. It seems like the best thing to do.
To prevent being caught out and to put your business in the best position possible. Here’s a few of our top tips for debt recovery from our Litigation department to help you get a handle on your debtors.
Go through all the existing jobs/files that you have. Make a note of how much will likely be due on each one and when you could expect that to come in. This will help you have an idea of your expected cash-flow. Look at any outstanding invoices and see how long they have been left unpaid. Make a note of any attempts to recover the outstanding sums. Make a decision as to when, if at all, you are likely to be paid and be honest. This will give you a clearer picture of where you currently are and where your problem debtors will be.
Make sure you know who your customers are. If you can andthink it reasonable to do so, carry out a credit check on them. You should know who you are extending credit to and be able to make an informed decision as to whether they are likely to have the funds to be able to satisfy any invoices.
Don’t treat all customers the same when it comes to extending credit. A long-standing or frequent customer with a good payment history poses a much lower risk than a brand new customer with no prior payment history. Extending credit to a new, unknown customer is always a much higher risk. Don’t be afraid to ask for a higher deposit, more frequent instalments or money on account if possible to manage the risk and to keep debt owed to the company down.
Work out the best approach for your company in chasing unpaid invoices. For example a process of a call 14 days after the invoice being sent to confirm receipt, a follow up call 28 days after the invoice was sent requesting when payment is likely to be made and then a letter advising of further action if payment is not received. There isn’t a one-size fits all solution so take the time to come up with a process that works for you.
If all else fails and you have a client who either refuses to pay an invoice or is simply not responding then get some legal advice on recovering the debt. There are multiple options available and a Litigation professional will be able to advise on the best way forward based on the amount owed, the debtor themselves and the costs involved.
If you do find yourself in need of some legal assistance to recover a debt, our Litigation department can offer some valuable advice. Please contact us if you wish to discuss a debt recovery matter and we will be happy to assist where possible.