Avoid writing off bad debt
While late or non-payment is well known to be adversely impacting businesses in many ways at present, one particularly disturbing trend lies in the proportion of companies having to write off turnover as uncollectable, says Hilton-Baird Collections (www.hiltonbairdcollections.co.uk). Non-payment can occur for a number of reasons, but the likelihood of this can be mitigated through thorough credit management strategies. Here are four tips we think will help you to avoid what must be considered a last resort:
1. Credit checks - The importance of knowing your customer before offering credit terms are a valuable way to gain an accurate picture. Remember to do this with any new customer, but also regularly throughout your relationship with them as their position could change at any time.
2. Review your account opening form - Something that’s often overlooked in credit control best practice is a detailed account opening form. This is your first opportunity to get as much information about your new customer as possible that you can use to get an accurate credit report, as well as all of their contact information for the credit control process. This will allow you to be as close to them as possible in the event they don’t pay within the agreed credit period, and serves the added bonus of preventing them from disappearing – which is another common issue.
3. Terms and conditions of sale - Unresolved disputes can also lead to non-payment. Often, however, a business isn’t even notified by a customer of any dispute until deep inside – or beyond – the agreed credit terms, whether it’s genuine or not. There are two ways to avoid this. The first should appear in your terms and conditions of sale; stipulate that any disputes must be raised within a specified period of receiving the invoice. The second is to make a courtesy call as soon as the invoice is sent across, confirming that the amount is correct and verbally notifying them of your clause regarding disputes. Additionally, this allows you to confirm receipt of the invoice and reaffirm when payment is due.
4. Consider specialist support - The cost of outsourcing the collection of an unpaid invoice is meagre compared to the cost of writing it off altogether. Debt collection agencies such as Hilton-Baird (www.hiltonbairdcollections.co.uk) can help to bring a swift result whilst reducing the impact chasing those invoices has on your credit control team’s wider activity.