EFFECTIVE DEBT COLLECTION

In our view, prevention is always better than cure.

We know that having a simple yet effective set of standard terms and conditions is key to any professional commercial organisation.

We would emphasise that it is also good practice to ensure that:

• Terms and conditions are specifically brought to the attention of the customer (and potential debtor) by way of standard letter at the outset of trading.
  
• Ideally such letter / order confirmation is signed by the customer to acknowledge receipt of it.
  
• Terms and conditions should be included on every purchase / order confirmation.
  
• Terms and conditions are published on your website - they can then easily be cross-referred to on all company documents.
  

Many people think that if they simply put small print terms and conditions on the back of their invoices then this will be good enough. That is wholly incorrect as invoices are post-contractual documents.

We can help with effective terms and conditions which are written in plain English.

However, there is nothing to beat having terms and conditions which are specific to the particular business and a particular industry. We know that every case is different. We think that it is important to do as much due diligence as is possible. We always suggest working smarter, rather than harder to build a business.

Know your customers

If you know your customers well then you are able to provide a more effective and competitive service. At minimum, we suggest Companies House searches against:

• The customer – ensure you obtain its unique company registered number before offering credit
• Any debentures or mortgages registered against the customer – the charge-holders might well have first priority over its assets in any later insolvency
  
• The Directors of the customer
  
• Any subsidiaries or fellow Group companies of the customer, which are material to the customer

Ensure Companies House searches regularly update - at least annually.

Ideally, searches will update every 3 months (although monthly would be more sensible on a general basis). We know that Credit Reference Agencies provide valuable data. However, care must be taken to ensure that something better than generic information is obtained. It is also crucial to analyse information obtained.

If Things Go Wrong we believe that it is essential to ensure that you maintain regular contact with the customer. That should happen in any event if you are doing business with them regularly.

However, if there is a potential insolvency of a customer, the creditors might be competing for assets.

Accordingly, it is important to ensure that you:

• maintain the correct email, landline and mobile number for all key contacts;
• ensure your conversations are friendly and positive, even if asking for full payment
• listen very carefully to what the customer says - this is often neglected but is essential;
• keep a record of everything is often overlooked but is critical in case formal action is required;
• It is always sensible to have answers for excuses routinely encountered – this will be specific to give industry;
• If there are any problems, then try to work with the debtor to find a mutually acceptable solution.

One of our contacts in a professional services industry, never issues an invoice without agreeing it with the client before send it out to the client. We think this is very good practice. In any event, we would always suggest trying to speak to a client/customer about making a courtesy call before the invoice falls due for payment.

This will mark you out as taking value to service and allows an opportunity to answer any small queries, which might otherwise interrupt payment. It also enables building a relationship.