Getting More Of Your Debtors To Cough Up
Cecil Aigin on credit control
Credit control and the collection of debts are time consuming necessities of every business. But, if you don’t allow the time to set up a strict system for collecting current and outstanding debts, your businesses may not survive.
It could be said that if we collect all accounts promptly, there won’t be outstanding debts, but that’s a bit utopian. The fact is that the older a debt becomes, the more difficult it is to collect.
Giving credit falls into two categories, i.e. that provided to private individuals and that provided to trade. In both cases it is essential to set out your payment and credit terms when producing estimates and agreeing a credit arrangement.
When dealing with private individuals, you should ask to be paid immediately on completion of the work. Set out your payment requirements in your estimate documents and politely draw your client’s attention to the details.
On completion of the work, present your invoice and ask for payment. Inevitably there will be occasions when your client is unable to make an instant payment so have stamped, addressed envelopes handy ‘to facilitate their posting you a cheque’.
Should payment not be received in a day or so, phone your client with a gentle reminder of your terms. Don’t accept, ‘I’m going to ask you to clean further areas in a week or so and I’ll pay for it all together’.
In the case of genuine trade clients who provide regular work, not those who occasionally contact you, arrange acceptable credit terms.
These may be immediate payment on receipt of your invoice, a monthly statement or some other pre-arranged schedule. Whichever terms are in position, take time to monitor receipt of payments and make contact with your client should payments fall behind the agreed terms.
Certain clients will take advantage of you if you allow the agreed terms to be extended and are slow to make contact.
The fact is that, whilst we are reluctant to lose an old client, it is time consuming and unrewarding to be continuously chasing someone for payment. Our time can be better spent in obtaining new customers.
We need to take a commercial view with difficult clients. Bad habits in making payments are progressive so that the monthly account who takes two months will soon fall behind to three months and you will reach the point where you will never bring an account up to date.
In fact you become their banker and an unwilling investor in their business.
It is important that your clients are kept aware of your strict credit controls. A supplier, who is on the phone immediately a payment falls behind agreed terms, is most likely the one not to be kept waiting.
It is important to have a good and accessible retrieval or filing system for keeping copies of estimates and invoices. Be punctual with statements and reminders. It is easy for the pressure of work to get in the way of credit control and debt collection. However, what is the point of carrying out new work when debt is accumulating.
Inevitably, you will have unpaid accounts with which your best efforts have not been successful in collecting.
You may consider legal action through small claim courts, or for significant amounts, with the assistance of a solicitor. Before taking these actions, make every effort to obtain payment and, if all else fails, notify your client of your intended action by recorded delivery.
Turnover from unpaid accounts may look good on your balance sheet, but it is better to have received payment and for it to be represented on your bank statements. Remember, there is no harm asking for money that is owed to you.
Cecil Aigin is an honorary member of the National Carpet Cleaners Association (NCCA)
This article has been reproduced from the Contract Flooring Journal website. You can find them at www.contractflooringjournal.co.uk.