29th November 2017.

Bad Debt: NOT A Fact Of Business Life

Recent statistics issued by the Insolvency Services have highlighted a 15 per cent rise in the number of formal company insolvencies, compared to earlier in the year.

The numbers sadly don’t get much better, with the number of people going insolvent up by more than 10 per cent between the months of July and September.

When you consider the possible implications of this, it is an unsettling thought, particularly if it is your customer’s business going into liquidation.

So how do you handle the thorny issue of a bad debt in your business? 

Everyone wants to protect their good relationship with customers, but there comes a time when extending credit any further will risk further damage to your business.

So you must act!

Here at CPA we encourage our Members not to be afraid to get back what is theirs.

What Can We Do To Help?

The most frightening statistic our staff at CPA have heard, is that 74 per cent of businesses think that late or non-payment is a fact of business life, and will always happen.

This should not be case, and here at CPA we make sure you know it!

We publish a list of local insolvencies every day on our website to keep our Members and clients informed on local businesses. This should also prevent them from venturing into business with companies who will not be able to pay.

See our most recent insolvency post here.

We also offer advice and swift action, for when you decide to fight against that bad debt. Please email us if you need our help.

What Can YOU Do To Help?

Make sure your business is protected from the potential damage that a bad debtor can bring, here are some ways to show you mean business!

Know Your Customer.

A bit of a basic one, but you need to know who you are doing business with. Make sure you know what to expect from them.

Is it a real business? Is it a sole trader or a limited company? Can you pay the company a visit?

Don’t be shy, be nosey, and ask as many questions as you can upfront to ensure you know as much as possible as early as possible.

Get hold of a credit report for the customer to check that they’re likely to remain trading for the foreseeable future and to assess your chances of getting paid. If you’re in any doubt, ask for payment up front before you do business

 Set Clear Guidelines For The Customer

You need to lay down the law early.

It may be seen as common sense to many, but when it comes to business it’s best to make things crystal clear from the start.

State your terms and conditions clearly, including how overdue payments will be dealt with. Make it clear to your customers that payments are to be made on time, with a strict due date to abide by.

Also make it clear that the full cost of any debt recovery activity will be added to the invoice.

And MOST importantly, make them fill out a credit application form before you start doing business with them. Even if they put up a fight, make sure all their information is provided and nothing is left out!

Ensure Invoices Are Received

Too many companies fall easily into bad debt by failing to check that invoices have arrived safely. Send the invoice by email or by mail of course, but always give them a call to ensure it has been received.

This should stop any “we never received it” excuses to be used later on down the line.

While you have communications open why not ask if they have any queries, that way any potential issues with payment can be addressed there and then.

Being Tough Pays- Stop Services

This does not mean get aggressive. Getting angry with the customer never pays, it will just lead to a further aggravated relationship between you and the customer, and will certainly not bring a positive solution.

Nonetheless, chasing overdue debts requires commitment. You need to put proper procedures in place for making demands for the payment of an unpaid debt, whether they’re paper-based, by email or over the phone.

Get External Credit Management Companies Involved

Consider employing a third party debt collection firm like us at The Credit Protection Association to pursue the debt. This can often lead to a positive result being achieved- please see some examples of successful recoveries by our litigation team at CPA here

What Now?

Bad debt has become real poison for businesses across the UK. Too many businesses assume they will be paid eventually, but in the process allow these bad debtors to eat away their business. You must take a stand! This could mean calling in an external collection company to chase the debt, or just being tough with the customer! Don’t let the goods or services you have supplied go under-appreciated, you are running a business, are you not?

Do you have debts owed to you by your customers? Do you have old outstanding invoices that need chasing? Are you being weighed down by bad debt?

Here at CPA we are happy to help and love a challenge! Go ahead and contact us at the Credit Protection Association and we can talk you through the next step.

Ella Bond 29/11/17

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