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Reduce the risk of bad debt

In the current economic climate, it is essential to develop good debt management practices.  With customer insolvencies on the increase, timely collection of debts and avoidance of bad debt is imperative to maximise cashflow. For some businesses this could mean the difference between continued trading and insolvency.

It is very important to have a clear and common-sense method for recovering debts.  If you do not have formal terms and conditions of trade ask us to assist you with drafting clear terms and conditions of business, making sure that the key terms of each individual invoice such as pricing and terms of payment are set out clearly in writing.

Consider a ‘retention of title’ clause in your terms of business so that you retain ownership of goods until they are fully paid for. In the event that the customer becomes insolvent you may be able to recover the goods. Ensure that invoices are raised as soon as possible after delivery of goods or services.

Make credit checks on all new customers and know at the outset whether the customer is an individual, limited company or partnership.  Consider reducing terms of payment for higher risk clients or requiring part payment before delivery. Alternatively you could require third party guarantees of payment.

Be sure to follow up unpaid invoices immediately, either with a reminder letter or a telephone call and require immediate payment or a satisfactory timetable for payment.  If payment is still not forthcoming, issue a ‘letter before action’ advising of your intention to start court proceedings.  We can assist with agreeing an internal credit control protocol and the drafting of the ‘letter before action’.

Be sure to follow up with swift steps to recover the debt so that you do not develop a local reputation for failing to follow up unpaid debts.

At this stage it is often sensible to call us in to assist you.  We have the necessary experience to progress things at a good pace and will be able to help you recover all you are due including interest on late payment, costs and administration fees.



Disclaimer

The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published.
Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.

 

 

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