Credit check your customers and set their credit limit
Always monitor customer’s credit limits.
Ensure that customers credit limit is adhered to and not to be exceeded.
Before taking on any new customers always be sure to credit check them.
A late paying customer will affect your cash flow and your business.
By credit checking them you will have access to their credit limit, credit score, and key financial history information.
It is not in your best interest to do business with a customer that has a low credit score
This customer is a risk and likely to be a slow payer, which will affect your cash flow.
Invoice on time, accurately and follow up with reminders
The invoicing process is an important part of your cash flow structure if it’s not correct it could interfere with your business getting paid.
Spend time planning a process to make sure it will run smoothly and efficiently.
By sending your invoices out on time you will create a pattern for your customers and they will get into a routine of paying you at the same time every month. Accuracy is key, and nothing will slow a payment down more than mistakes on the invoice so double check them before they are sent out. Once your invoices are sent out, either call or email to follow them up a few days before you are expecting payment. Even if a customer does plan on paying you, sometimes bills can be pushed to the back of the queue, a gentle and polite reminder a few days before could benefit you.
Be firm with overdue payments
If a customer misses a payment, you have to be firm with them. Have a process set up with how you deal with late payments and ensure you follow them for every customer. Contact the customer and try to get to the bottom of why they aren’t paying you. To work out a payment plan over a period of time, it would be in your best interest to try to resolve the problem yourself. Another option to consider over non payment of invoices is to take a customer to small claims court. This is a more cost effective process compared to instructing a solicitor to deal with this on the companies behalf.
Have a system for chasing debts
If a customer continues to miss payments you can cut their service however then you could lose a customer, always think carefully about the route you want to take. For instance you have contacted the customer and haven’t received a response.
There are different routes you can go down when trying to collect debt
You can issue debt collection letters, small claims court action, sending a statutory demand within a firm of solicitors giving the debtor twenty one days to pay. For a statutory demand to be issued the debt has to be over £750.
It is likely that the debtor will pay the statutory demand. However in the rare case that the statutory demand has not been paid, then a solicitor acting on your behalf can issue a winding up petition against the debtor.
This process will be expensive.
Monitor your customers
Monitoring your customers is one of the best things you can do to stay ahead of the game, if you are monitoring them you are able to spot the warning signs if problems start to arise.
An example being if you are monitoring your customers credit report and their credit score drops, you are able to see why.
A risk tracker monitors any changes to their credit report and notifies you by email. There is a charge for this service of a risk tracker.