Credit control is a vital part of any business. It’s about doing good research on your clients, and giving credit only to those who demonstrate they are able to pay. And on time at that! A sale isn’t a sale until the money is in the bank – in other words, ‘it doesn’t count, until it’s in the account’.
It’s just one of a stable of tools a business can employ in their financial control armoury, but before you allow your customers to take goods from you, or before you send your team in to start work on a job make sure your client is credit-worthy.
Over the years, we at Top Service have noticed many similarities and distinct patterns appearing amongst the debts we’ve been asked to collect. It’s been possible to build a clear picture from these of how to avoid the situations in the first place, so we’d like to share a few of them with you.
1) TIP 1 – TIGHTEN UP ON CASH SALES
Due to the nature of this type of transaction few details are generally recorded. Sometimes just a first name and the site address are taken. The problem is that an alarming number of these ‘cash sale’ transactions are turning sour. Cheques are bouncing, or perhaps the customer is not on site at the designated time to pay cash on delivery, but the order is dropped off anyway.
Alternatively, some ‘cash sale’ customers are also creeping onto a weekly or monthly ‘unofficial’ account by forgetting cheque books or cash and promising to ‘sort it out when I come in next week / month’. If some of your ‘cash sales’ are turning into ‘bad debts’ it may be time to examine your procedures and tighten up your whole cash sale system.
2) TIP 2 - DON’T BURY YOUR HEAD IN THE SAND
Everyone is guilty of a little paper shuffling at some time, i.e., moving an awkward file between trays, desks, offices, departments, etc., without actually dealing with it. The problem with debts is that the older they are the harder they are to recover.
Be disciplined, set yourself a definite target for collecting the debt and stick to it. If, for any reason, you are unable to collect make a firm decision about what to do next then be decisive. Either write it off or pass it to a third party for collection.
3) TIP 3 – BYPASS THE ‘OLD PALS’ ACT
Collecting money from people that have been good customers for the past twenty years can be awkward. If you have the sneaking suspicion that they are taking advantage of your good nature then the only option is to delegate responsibility to a third party.
If you don’t want to pass the account to an outsider, at least ask someone else in your company to handle it. You can then say without any conscience that you’d like to help but the matter is out of your hands.
4) TIP 4 – MAKE SURE A CREDIT APPLICATION FORM IS COMPLETED EVERY SINGLE TIME
Without fail. The one you skip will be the one that turns bad. Make sure you know who you’re dealing with before you start supplying. If you don’t already use a credit application form then telephone us and we’ll send you a sample (01527 518800).
Think about what will help you get paid quickly when you are designing your credit application form
Who authorises the payments? What’s the correct address for invoices? What information do they require to get your invoice processed?
Get the information while you can – once you’re owed money, the unwillingness to provide information starts.
5) TIP 5 – KNOW YOUR RIGHTS WHEN PAYMENT IS LATE
Your invoice has been submitted, the payment time has passed and now you have to make a decision. A polite chasing call may be all it needs. Or an email. But what if you’ve chased a couple of times and got no response? At this stage you are entitled to add late payment interest and compensation charges. Click here to calculate how much you could be entitled to.
5) TIP 5 – USE TOP SERVICE TO CHECK THEM OUT OR COLLECT THE DEBT!
Being a specialist agency for the construction industry, we’ve built up a whole raft of insider information over our 25 years. We now have over 2,500 clients – from small builders’ merchants through to multi-nationals, who trust us to provide accurate, up-to-the-minute information to them.
If you’re about to do new business – check it out with us first. Or if you find yourself in the unfortunate situation of having bad debts to chase – let us do it for you. We work on a no-win no fee basis.
For more information telephone our enquiries team on 01527 503991 or email firstname.lastname@example.org