I met with our bank manager yesterday whilst buying some insurance products for KSA from the bank. Sue has just joined our bank from another clearing bank and hopes to build up a strong portfolio of small businesses. We of course want to be one of her best customers!
Anyway, Sue reported that each day the list of her customers on the warning (or excess) list is growing. This means that a number of bank customers are exceeding their facilities by issuing payments or not receiving payments into the account as fast as they hoped.
Now you already know that bouncing cheques is not a good idea, so get our free daily cashflow model by emailing me email@example.com
But what if your debtor days are rising?
This means the time that your customers take to pay their bill owed to your business.
If you are seeing your customers or clients taking longer to pay their invoices please send me a text or email or post a comment below. You don't have to give your real name!
What can you do when this happens?
Well you can visit our special web page that helps you collect YOUR MONEY by clicking here.
If you have not got time to visit the page here are some of the main points from that guide.
Dealing with late payment:
- Introduce a strict policy for debtor collection built around specific target dates. Assertively collect debts – it is your working capital.
- Take trade references up – most do not. We are amazed at how many businesses fail to ask for references, how many fail to read and act upon any they get and how lax credit limit enforcement is when faced with "iffy" references.
- Buy a subscription to a credit reference agency early warning system. This is particularly important if you regularly open new accounts and or large accounts. It is so cheap to do and can save you, literally, thousands of pounds. Try Creditsafeuk
- Refuse to supply even if a "good " customer is over limits, call them and ask what the problem is.
- Do they have the invoice, delivery note and are they satisfied? If yes ask for your money. If they still don’t pay consider issuing:
- Final warning letter - you will commence action if you do not hear within 7 days - this helps establish that the debtor accepts the debt.
- Obtain a County Court Summons form from your local court; issue a copy of it with all details correctly filled in. (We are amazed at how many people go to the bother of issuing half filled out forms!)
- Tell the debtor you will issue the summons in 5 working days unless they pay. If this fails:
- Issue the summons to the court. After judgment is granted call the debtor for the money. If this fails:
- Proceed with a warrant of execution - basically an instruction to the court to collect the money (they send a bailiff to do this). If this fails
- Consider a winding up petition if the debtor is a company or a bankruptcy petition if the debtor is a sole trader or individual.
- Up to the last step above this is a relatively inexpensive way of debt collecting Build a collection system, use "Sage" or other accounts package or use a manual system with trigger dates for every invoice.
- Or go to the customer's premises and demand to see the MD, the owner or the finance director, say you will not leave until you receive a cheque! this is a powerful way to get paid.
- Charge interest – its your money!!
Remember a good customer who does not pay is not a good customer long term!
If you collect cash aggressively and cut costs (see yesterday's post) then you will survive the credit crunch!
Happy debt collecting!