Top tips to recover your business debts

This is vital to ensure that you have the correct details for the business you are engaging with, that you know who within the organisation has authority to make payments, where you can escalate any concerns and your key contact within the business.  You may also wish to take this opportunity to run a credit check against the company to understand their financial position before entering into a contract with them.

Over time, maintaining a positive relationship with the business and the key contacts will encourage prompt payment.  By doing this, you will be kept up to date with any changes in people and management, allowing you to ensure invoices and contract matters are dealt with by the most appropriate person.

The first step with any new relationship whether that is with a client, supplier or distributor is to establish and agree the payment terms within your terms of business.  This will remove any ambiguity regarding your ongoing financial agreements, and provide the platform for any unpaid invoice disputes in the future. 

During these discussions you can clarify any payment processes particular to each business, for example, whether they carry out payment runs on a particular day of each month.  Any flexibility of this nature should be documented within your terms of business, which should be reviewed for every new customer, client or supplier you engage with to reflect the market and your commercial relationship at the time of agreement.

You must be clear with your payment terms and adhere to them; chasing payment too early can sour your relationship, while chasing too late can provide your debtor with too much flexibility and lull them into a business relationship where late payment is accepted.

Before setting your payment deadline you should consider a variety of factors, including when you realistically require payment for the service or goods you have provided.  For example, if you require payment in 30 days when it is likely the debtor will go over that term, you may wish to consider giving payment terms of 14 or 21 days.

It is likely that a variety of employees within your business will be sending invoices and so you should have a clear credit control policy that all employees are aware of and abide by with adequate reporting and administration processes in place to allow your Finance teams to stay on top of outstanding payments.

Once you have provided the goods or services, you should be prompt with the invoice being sent.  A delay in sending the invoice may imply that you are not in a rush for the payment and so may inadvertently permit late payment.

We often see missed invoices being used as a reason why payment is delayed so you will need to consider the method in which you are sending the invoice.  Are you emailing the invoice with a variety of other documents?  Could you set a read receipt for the email?  If sending in the post, is the address clear on the envelope and would you consider sending recorded delivery?  You should give the invoice its correct level of importance, not only to ensure it is received but to convey to the debtor the importance of prompt payment.

Ensuring the correct details are on the invoice may seem an obvious point, however a business questioning elements of an invoice are a well-known delaying tactic, for example:

• The invoice may have been addressed to the wrong person within the business who does not have the authority to make the payment. 
• The invoice may not be itemised correctly and so sections of the payment are in dispute or unclear.
• Ascertain with the client at an early stage whether they will require a purchase order number and include this on the invoice. 
• You should ensure the correct details are on the invoice for them to make payment, whether this is your bank account, where to send a cheque or how an online payment can be made.
• Always include on the invoice a reminder of your payment terms.

This point refers to having an effective credit control process in place which monitors the day an invoice was sent and the subsequent date payment becomes due, in which case a prompt reminder is required.  While this approach may need to be varied for each debtor depending on the nature of the service and your relationship with them, having a strong foundation for your debt recovery will stand you in good stead in collecting debts. 

Finding the right balance of flexibility with your debtor can be tricky; you may wish to extend a deadline once to encourage goodwill, however multiple extensions to deadlines will create the wrong impression and will give them permission to continue to delay payment.

Having a credit control system in place will allow you to spot trends in payment patterns from your clients.  You may wish to discuss stricter payment terms with those who have been delayed in the past.

In this respect, we not only consider the financial penalties that may arise from Late Payment Compensation if the matter goes to legal proceedings, but the day to day implications of late payments.  Could you cease trading with them or supplying them with the goods and services until payment is made, for example?  Taking action such as this may entice payment, however there may be other options to consider in order to maintain a working relationship with them in the future.

Within your credit control process, you should be able to register the attempts to recover payment and the dates, whether that is via telephone, email or post. Any responses should also be kept in writing along with the supporting documentation in the form of the terms of business, contract, the invoice itself and the agreed payment terms.  This will be valuable information should you require the assistance of a Solicitor in the future.

Should time lapse and you are not successful in your own attempts to recover payment, swift action from a debt recovery professional can lead to a successful recovery of the outstanding debt.  We have over 35 years of experience in collecting debts successfully for our clients, many of whom were on the verge of giving up recovering the debt owed to them.

We will work with you, respecting the relationships you have taken time to build and approaching your debtor in a manner you agree with.  In most situations a Letter Before Action from us is enough for payment to be made, as a debtor does not wish to end up in Court.  If, however, payment is still not forthcoming we have the expertise to manage this whole process allowing you to focus on other areas of your business.