Cash flow remains a key concern for Companies with a number of Companies juggling their creditor’s demands for payment. Our experience is that the average number of days for payment of an invoice continues to increase which in turn is impacting on the health of creditors. If your aged debtor list is increasing or there is an extension in the average number of days for payment of your invoices, there are steps you can take to limit your exposure;
CAN YOUR ACCOUNT OPENING PROCESS BE IMPROVED?
Ensuring that you have the correct information for a new client is vital to the efficiency of your internal credit control process. The most common errors that we find clients make is not correctly identifying the legal status of their client. e.g the account is opened in a debtors trading name and is it not known whether the client is a Limited Company or Partnership.
Running a “financial health check” on your new customer is a key way to limit your exposure to bad debt. Without running a financial health check, it is impossible to assess the risks associated with offering credit terms to your customer. If you know that your new customer is high risk, you can take a view on whether you should either a) demand payment on Order or b) lower the credit limit applied to the account.
We charge £10.00 plus VAT for a report on a Company or partnership’s financial health. This search is extremely cost effective when considering your increase in exposure to bad debt when trading blind with a new customer.The report, which will be sent to you, will look at;
- The debtor’s “health rating”; whether the debtor is considered to be “high risk” in terms of their financial position or whether the debtor has a good trading history;
- The debtor’s trading address
- The debtor’s legal status
- Whether there are any CCJ’s against the debtor and whether these have been paid;
- The debtor’s last filed accounts including balance sheet (and any assets identified on the same)/ profit and loss accounts / cashflow and turnover (where such information has been filed with Companies House);
- Whether any petitions have been filed for the winding up of the debtor;
- The details of the debtor ‘s directors and shareholders (if a Limited Company)
CAN YOUR CREDIT CONTROL PROCESS BE IMPROVED?
Being proactive in chasing your debtor is key for reducing the aged debtors list. This entails chasing your debtor as soon as the payment period expires and ensuring that a second and third chaser letter are sent at weekly, or fortnightly, intervals thereafter. Including at least one telephone call in to your internal credit control function will also assist to apply pressure to your debtor.
Ensuring that your credit control team / management and sales team communicate is vital in limiting your exposure. If your credit control team is aware that a client is becoming slower in making payment, or failing to make payment altogether, a decision should be made immediately regarding whether to offer any further credit to the customer.
Your exposure to a debtors insolvency increases significantly with the passage of time and therefore, instruct a Solicitor promptly upon the expiry of your credit control process.
Breeze and Wyles offer a low cost debt recovery service with our fees for chasing your debtor starting at £2.00 plus VAT for a Letter Before Action and depending on the amount of the debt, between £65.00 plus VAT and £170.00 plus VAT for issuing proceedings. Our fees are fixed allowing you the comfort of knowing the true cost of pursuing your debtor through the Courts.
If you would like further information regarding our debt recovery service, please contact our Rita Wright at email@example.com or 01992 558411.
If you would like further information regarding our “health check” service, please contact our Maria Koureas-Jones at firstname.lastname@example.org or 01992 558411. We charge £10.00 plus VAT for one off reports on a customer but can offer the service at a monthly cost where you wish to “health check” a number of customers each month.