Below are 7 routines to apply to your business, which act as a preventative against your customers getting into debt with you. Here are some of the key debt recovery problems resolved before they happen!

1. THE CORRECT DETAILS

The full company name including “Limited” should be included on your invoice.

Why?

If your customer decides to dissolve their company and they are a Limited Company, you can email Companies House to “object to the strike off”. You must provide evidence showing that your client owes you money, which includes copy invoices, statements, and contracts. If your documents do not show the correct company name on them, including the word “limited” or “ltd” on them, then Companies House will dismiss your objection and continue to allow the company to be struck off. Meaning, you don’t get your money!

Many payment problems stem from not having the correct address, company name and accounts payable details.

Principle 4 of the new General Data Protection Regulations state that all data must be up to date and accurate. So now is the time more than ever to get all your customer details up to date.

  • Get the company full name and a verified address
  • Get the correct details for the client including, invoice & accounts payable details

2. CHECKING & VERIFYING

When your customer is not paying cash upfront/payment in advance, always run a quick credit check on them to check their credit status first.

It should be part of your “new customer procedure” to verify their name, address, and their credit rating before contracting work.

If they have a CCJ against their name, it does not mean that they won’t pay you, but it does mean that you should take the steps necessary before contracting work. You can invoice the client before you provide the goods/services and have the payment made to you before supply.

  • Doing this will save you time, stress and money going forwards.

Download Free “New Customer Account Form Template”

3. PAYMENT TERMS

Discuss your payment terms with your customer before you enter into an agreement to do work. Talking about how and when you expect payment is key for good business practises.

When you issue a quote, contract and invoice, ensure your payment terms are always included on each of them. If your payment terms are not included on your documents, and they are for example “14 day terms”, they will automatically default to 30 day terms in the eyes of the law.

4. GETTING PAID ON TIME

  • Your Invoice

Ensure it includes the name of the company or person that is paying the invoice, the amount, your bank details and your payment terms. When you send the invoice to your customer, ask them to confirm they have received it.

  • The customer invoice followup
  1. Call your customer 2 days after sending your invoice to check they received it, (if they did not respond by email when you sent it).
  2. Ask if there are any queries with it
  3. Confirm what date payment will be made
  4. Follow up by email to confirm what they said

You can thank them for their business and ask for a review at this point too.

Don’t wait until your invoice has not been paid before you chase it. Normal credit control procedure is to make contact once you have sent your invoice, before it is even due for payment.

5. YOUR FORMAL DEBT RECOVERY PROCESS

At what point do you class a late payment as a debt? What is your formal debt recovery process?

Unless you agree a payment date, the customer must pay you within 30 days of getting your invoice or the goods or service.

On the 31st day your invoice is overdue.

  • Design and apply your process for debt recovery.

6. WHAT DO YOU DO NOW?

Contact your customer and confirm what date they will make payment, always put this in writing too. Give them a specific deadline to make payment by: example (Friday XX November @ 4pm)

If their payment does not arrive by your given deadline, depending on your relationship with your customer and the response /no response from the initial contact made, you can:

  • Issue them with a 1st reminder letter giving them 7 days to make payment, before you add Late Payment Fees, interest and send a Letter Before Action OR
  • You can issue a Letter Before Action right away, including late payment fees, giving them; 14 days (for Limited companies) to pay you, before court action commences OR 30 days (for Sole Traders) before court action commences.
  • 80% of the time, issuing a Letter Before Action will deliver your payment.

7. BLACK LISTS

Publishing a blacklist of bad payers is seen as “defamatory” or “restricting someone’s right to work.” You can get in trouble for such things. However, there is a public register that you can access to see anyone who has a CCJ brought against them for non-payment.

This is: The Register of Judgments, Orders and Fines (sometimes referred to as ‘The CCJ Register’)

Free Companies House Tool

You can “follow” a company on the Companies House website for free. If the company you are following were to be struck off, you would receive an email from Companies House telling you so. This will give you time to check whether the company owes you money and if so, to write to Companies House to object to the strike off, whilst you recover your debt.

If you need further advice or have any tricky debts that need recovering within the last 6 years, contact Franklin James Credit Management to discuss our services.