There have been reports in the legal press recently about a fall in Court judgments against businesses in the first six months of 2016. The figures have come from the Registry Trust and show that there has been a 19% fall. They are now at their lowest level since 2008.
Some think the Court fees which have to be paid to issue a claim are to blame; you now have to pay a fee of £10,000 if your claim is for £200,000 or more and there are other Court fees to be paid along the way.
So, with the thought of suing your customers or suppliers looking less tempting, what else can you do to make sure you get paid?
Well, for a start you can review your own internal order and credit control processes. The following are just some examples of areas to think about.
Make sure your contract is clear about what needs to be paid and when right from the start. This will reduce the scope for mix ups or misunderstandings.
Make your terms of payment clear on your invoices.
Think about the type of dispute resolution mechanism you want in the contract. For example, this can be anything from informal discussion between Managing Directors right up to formal Arbitration or anything in between. If it works, then this can avoid the need to worry about Court fees completely.
Know your customer; do some checks on them to find out whether they are a limited company, partnership or sole trader and find out whether they will be good for the money. The internet is a good place to start
Minimise the risk of not being paid; consider whether you want new customers to pay some of your charges up front, say 50%. What is common in your sector or business?
Keep a close eye on “problem” or slow payers and take control of the situation quickly. Do you want to place their account on stop or insist on payment in full before you supply? Make sure this is dealt with in your contract.
Make you have a system in place to promptly chase payment as soon as it becomes overdue. Telephone calls are often far more effective than emails or letters as the first step, although you will want a “paper trail” if payment your first attempts don’t work.
So, this gives you an idea of how to tighten up your processes so your customers pay on time and your cash flow improves. The key is making sure your contracts are clear about how and when customers should pay and having a system to chase any unpaid charges as soon as they fall outside of your payment terms.
For more information, email firstname.lastname@example.org.