Ensure your company has got signed contracts with all customers
that clearly state your payment terms. These terms should also be
clearly described on your application forms and the invoices you
subsequently send out. Be sure they know what the credit terms are,
whether you offer discounts for prompt payments or bulk purchases,
whether additional costs are payable (e.g. VAT or carriage costs),
and whether you charge interest on overdue accounts (all businesses
are legally entitled to do this).
Buy a credit report from a recognised credit reference agency
(e.g. Graydon) that collects trade payment information on how large
companies pay their bills. Don't rely totally on the taking up of
two references given to you by the potential client. They may be
cultivated! Don't be taken in either by a great looking set of
accounts to determine whether you will get paid on time; a healthy
looking balance sheet might mean that your potential customer is
very proficient in getting its suppliers to finance its business!
Set a credit limit for each new client, and don't allow customers
to exceed limits without your permission. After all, they are set
for a good reason, as you have assessed the creditworthiness of the
customer and how much your business can afford to wait for (or
lose, should the worst scenario occur).
As part of their internal control procedures, large companies
often require signed purchase orders before paying invoices. Ask
the manager/department placing the order whether they need to raise
an internal P.O. and if so, have they done so covering the value of
the order. Ask for a copy of the P.O. (N.B. some large companies
require invoices from suppliers to quote the P.O. number before
they are paid).
Take away excuses for delayed payment. After dispatching goods,
ensure that your customer has received them and that there are no
problems with quantity or quality.
Send statements at different times in the month to your
invoices. Sometimes this tactic can provoke questions, particularly
when original invoices have been lost, not received, or
Confirm with your client when your bill is expected to be paid,
remembering to ask whether they have specific cheque run dates.
If payment is delayed, chase your money by telephone rather than
letter. Some experts in this field say that the telephone method
can be 80% more effective! Always prioritise your cash collection
activity, making sure you chase the oldest and largest debts first.
Be friendly but firm when speaking with them, and don't forget to
remind them that you charge interest on all late payments.
Maximise your leverage. Try to establish how valuable the
product you're selling is to your client. It may be a vital
component in a manufacturing process, especially if it has been
developed to the client's own specifications.
Keep abreast of news that may affect the creditworthiness of
your key clients. Put their names on a low cost monitoring service
with a credit reference agency (Graydon's service is called
CreditWatch). There is nothing worse than being the last to know
when something has happened to one of your key customers.
Try and establish a personal rapport with one or two people in
your client's Accounts department. The personal touch never
Graydon UK Ltd. Registered in England No. 363849. All Rights Reserved © 2013