12-Step Process continued

Here are the next six steps in the UK Debt Recovery Guide 2005-06’ to avoiding the build up of bad debts. As with the other blogs so far these are all steps you can take yourself without recourse to professionals like us.

7.Initiate and maintain close contact with your customers, particularly with the person responsible for paying the account. Try to create a rapport so that, even if when the money is tight, you are at the top if the list to be paid. Remember human nature still plays a part in business decisions.

8.Make regular credit checks on your existing customers. I’ve mentioned this before and it is a source of bewilderment how many companies don’t do this.

9.Ensure that all dispatch notes and invoices are accurate, and are delivered to the right customer, at the right address at the right time. Simple enough yet it is surprising how often this is the problem causing late payment.

10.Put a “stop” on supplies to customers who are not paying, and use their desire for further supplies as a spur to payment.

11.Send regular reminders and chase payment persistently by telephone/fax/email and by visits to your customers. Time consuming maybe, but worth the effort.

12.If the above fail, place the debt in the hands of a debt collection agency like ours or a solicitor who specialises in debt collection!

12-Step Process
I’ve collated a lot of the following information from the UK Debt Recovery Guide 2005-06’. This publication is off huge benefit to the business community. 
When it comes to managing the relationship you have with your customers it highlights the need for a continuous process and a fluid mindset. Here are the first six points in this stepped process, which is advised in order to avoid the build-up of bad debts.

1.Check a new customer’s creditworthiness before drawing up a contract. We can do this for you if you are unable to yourself.

2.Refuse orders if a customer has an unacceptable payment record or obtain payments in advance. Refusing an order is often the hardest thing anyone in business can do. It goes against the grain however sometimes it is absolutely the right thing to do.

3.Set strict credit limits and stick to them. Again this is something many companies don't do. Sure they'll set them but how many stick to them and enforce them?

4.Prepare unambiguous written contracts and/or terms and conditions of trading. This is self explanatory and any legal firm can advise you on this, also often trade bodies can help too.

5.Involve the sales force in negotiating the payment terms and ensuring that these are understood and agreed from the outset. Getting 'buy=in' from the sales team makes all credit control easier, involve them in this process wherever possible.

6.Make sure you know and comply with the procedures used buy your customers’ buying and accounts departments. Not only is this good business practice it is also polite. Make it your business to find out how your customers finance department works and make sure you comply, it helps remove any potential future problems.

Shield your business from bad debt cont...

This week I’m continuing the theme on how to take your own steps to avoid bad debt.

4. Utilise the Legislation
Could you be entitled to more money? Remember you may well be able to add Interest and Collection costs to the debt. Find out more at http://www.debtscotland.com/rightclaimint2.cfm

5. Keep a tab on things
It’s a good idea to have a procedure in place for flagging up unpaid invoices. If the customer hasn’t paid, is there a reason for this? You’d be surprised just how many businesses don’t do this as a matter of course.

6. Talk to your Bank and HM Revenue and Customs.
Find out if you are able to get access to increased borrowing. Can you take advantage of invoice discounting or Factoring Services? It could be beneficial to let HM Revenues and Customs know if your customer folds as you should be able to reclaim VAT and may even be able to arrange deferral of VAT and PAYE. I’ll be expanding on this topic in the next few weeks.

Whether you’re a small trader, a multinational corporation or an international bank, you’re going to have to deal with bad debt at some point along the way. In this blog I’ll outline the first 3 steps any business can take, itself, to help minimise the chance of bad debt. Many businesses will be doing most of these already yet it never ceases to amaze me how many businesses aren’t doing all of them. I’ve 6 ‘steps’, here are the first 3 steps you can take to shield your business from bad debt. I’ll be expanding on a couple of the points in much more detail later this month.

1.Don’t put all your eggs in one basket
Be careful to avoid this situation. The last thing you want is debt from one customer putting your business in jeopardy.

2.Know your Customers
Will the customer be able to pay their bill? Carrying out credit checks are vitally important and credit limits should be set for each customer. You can purchase credit reports from www.ykcreditcheck.co.uk. This is an area I will expand on in the coming weeks.

3.Consider different payment terms
There are several different payment options you may want to explore such as cash on delivery, staged payments and discounts for prompt payments. Some companies are very rigid on this but it can be beneficial to discuss other options with customers.

I'm happy to discuss any or all of these points with you if you'd like, simply contact me via the contact us page.

Every day I speak to many businesses about recovering debt, UK debt collection is, unfortunately, a growing business.
Getting debtors to pay their bills can be difficult and time-consuming.
Unfortunately all businesses have to deal with bad debt from time to time.
However, before you come to a company like ours for help, there are a variety of ways in which you can shield your business from bad debt.
Over the next few weeks I’ll be shedding light on some of these topics.
I’ll be blogging about everything from Credit Ratings and Payment Terms to talking to your Bank and HM Revenue & Customs.
Also, I’ll take you through a 12-Step process which can help you manage the relationship you have with your customers and help you avoid the build up of bad debts. I intend to post a new blog every Tuesday and over the next few weeks we'll shine some light on the often simple steps a company can take to try and prevent incurring bad debt in the first place. All comments are welcome and I'll do my best to respond to any questions you've got.

Stephen Cowan