Giving Your Business a Healthy Chance of Being Paid
16th July, 2012
1. Know your Customer
whilst this may sound ridiculous it always amazes me how many people trade with customers, by the supply of goods or services, without knowing who exactly that customer is. Is your customer a Limited Company or Partnership or an individual trading from home? You need to know this information at the outset and ensure that all your invoices are in the correct customer name. As, if not, this can come back and bite you when you come to chase that customer for payment.
Get purchase orders from your customer which would show their correct trading name. Have your customer complete a simple Application Form showing their correct trading style, the names of the directors or partners and always ask for their home addresses as well as any trading addresses. Ensure you have Terms of Business and ensure that your customer is bound by these terms by sending them out upon receipt of an order. If need be, and if your customer is a Limited Company, think about getting Personal Guarantees from the directors or any parent company.
3. Credit Control
Be quick when you credit terms are breached, ensure that those terms are incorporated into your Terms of Business (see above). Get stricter, as soon as your invoices fall due, be on the ball and have a reminder letter sent out to the customer. It is often “he who shouts loudest gets paid”.
4. Know your Rights
Know what legislation you can use to coerce your customer to make payment. If your customer is another business you can add Late Payment Compensation Costs to the overdue invoice together with Late Payment Interest. This often will get your invoice(s) put to the top of the pile for payment.
Be prepared to commence proceedings. Litigation isn’t as expensive as it is thought to be. As detailed in point 4, you can add both Late Payment Compensation Costs and Late Payment Interest to the sum you are claiming together with the Court Issue fee. In some instances, the issue of a Claim Form can actually pay for itself.