| Fact Sheet 4 - Steps that you can take to improve your internal debt recovery rate
DELIVERY OF AN INVOICE:
- Ensure that an invoice is delivered promptly and accurately and that the invoice states the customer’s full name. Make sure that you are able to clearly and correctly identify your client’s name and status – is your client a Limited Company? Partnership or Sole Trader? Include your customers full and correct name. Correct identification of your customer is imperative if you are to successfully decrease your average debtor days.
- Include on the invoice your customer’s reference number so that your customer is able to easily identify the invoice.
- Ensure that the invoice states clearly the payment terms and the date by which payment is to be made.
- Ensure that a copy of the invoice is retained.
- Ensure that the invoice goes directly to the person in the organisation who will be responsible for paying the bill. It is sensible to call and obtain this information from your customer, before sending the bill. This limits the risk of your invoice sitting on anothers desk for a few days or weeks, before finally making its way to the correct person.
- Ensure that your invoice clearly shows the manner in which payment can be made. Ensure that you offer the opportunity to pay by credit card / debit card or BACs and identify how these methods can be utilised by your payee. Payment by these methods is often the quickest and easiest method for your payee – the easier it is for your payee to pay your invoice, the quicker you will get paid.
- Ensure that you have a proactive and efficient process for chasing unpaid debts, as soon as the payment term expires. The key here is to ensure that you receive reminders, through either your accounting package or outlook, as soon as an invoice becomes overdue. You can not chase your debts proactively if you do not know when an invoice has become overdue.
- Where the chasing of invoices is being done internally, automation is ideal because it will limit internal resources whilst ensuring that debts are still being chased. Use standard precedent letters and diarise weekly chasers to be made both by letter and telephone.
- Telephone calls are time consuming but often offer a higher rate of return. Make sure you stick to the timescales (If you tell a customer you want payment in 7 days and they don’t pay, chase again by letter or phone promptly on day 8).
- Decide how many letters and telephone calls you will undertake during your internal credit control process and what the course of action will be should payment not be made. We would suggest that instruction to us to send a letter before action to your debtor, at a cost of £2.00 plus VAT, should be the automatic next step following exhaustion of your internal credit control function. Our instruction is quick and easy and instructing us promptly will ensure that ongoing pressure is applied to your debtor. This will increase the likelihood of recovery.
- Make sure that staff with the appropriate skill set and personality are responsible for your credit control. There is little point having someone who is overtly shy and embarrassed, in charge of asking a customer for a commitment to pay by a certain date.
- Make sure that your credit controller is efficient and proactive and keeps records of each call made. When a debtor says that they will make payment, make sure that your credit controller asks them to commit to a date by which payment will be made. If your customer defaults, ensure that the customer is called again and ask for a revised payment date. If the customer defaults again, it is highly likely that further action is going to be required. Continued failure to meet agreed payment proposals may be a sign that your debtor is experiencing financial difficulty.
- To illustrate the importance of making a record of a telephone call with a debtor, you can take the example where in a telephone call a debtor admits liability, or tries to agree a payment plan. A telephone note recording admission may well help to question the credibility of a debtor who subsequently tries to deny liability for the debt.
- If you do agree an installment plan with a debtor, it is worth confirming the agreement in writing and making sure that when negotiating the agreement with the debtor, you reserve the right to claim the entirety of the invoice should the debtor default on the installment plan.
- Act quickly and don’t delay. Delay will breed further delay by your debtor. If you threaten Court action or referral to a Solicitor, follow through with the threat. Otherwise, the debtor may not take you seriously and prioritise paying other creditors that are pushing for payment.
- Categorise your debtors in to those who “Won’t pay” and those who “Can’t pay”. Where resources are limited, focus your internal resources on chasing those who “won’t pay”.
To receive further fact sheets or for further information about our commercial debt recovery service, please contact Rita Wright of Breeze and Wyles Solicitors on 01992 558411 or firstname.lastname@example.org