One of the main reasons why a business can fail is that it cannot pay its bills. A business which does not collect payment from its customers, which then struggles to pay its suppliers will very quickly find itself out of business. With bank lending stagnant and in difficult trading conditions it is more important than ever that businesses have credit control procedures in place and that you take effective action to recover debt.
If you supply goods and/or services and do not require advanced or immediate payment you are giving your customer credit and you are taking the risk that you will not be paid. In each case, a business is well advised to ask itself:
- Do you know your customer before you extend them even a penny of credit? Are you dealing with a consumer or another business and do you know the difference? Do you have a record of your customer name, address, telephone and fax number, insolvency history and a clear idea of how much credit you are prepared to extend them?
- Do you think you can get a deposit, money on account or a personal guarantee from a director when dealing with a limited company?
- Do you have well prepared terms and conditions of business and are they incorporated into every contract?
- After you send your invoice to your customer do you diarise to chase immediately upon payment becoming due (for example, within 30 days of the date of the invoice)? Do you follow up a polite chasing letter with a polite phone call? Do you follow this with a firm demand or a Letter Before Claim?
- Do you know that in business to business contracts (as opposed to business to consumer contracts) under the Late Payment of Commercial Debts (Interest) Act 1998 you can claim interest on the debt at the rate of 8% per annum above the base rate and you can also claim compensation on each debt as follows:
Debts up to £999.99 - £40
Debts from £1,000 up to £9,999.99 - £70
Debts from £10,000 and above - £100
- Do you know your options if the debt remains unpaid? Are you comfortable commencing court proceedings yourself or do you have a solicitor who you can trust who is only a phone call or email away?
From everyone at Emsleys, we hope you enjoy the Jubilee celebrations. God Save the Queen.Back to Blog