Times are tight and we can all sympathise with customers who have genuine problems paying on time. But can you tell the difference between a customer who can’t pay and a customer who won’t pay? Perhaps it’s time to find out…..
1. First of all, you need to assess the creditworthiness of new customers before doing any business with them: It’s important to have a credit policy; Get prospective customers to complete a credit application form; Remember its your decision whether you give credit to a customer or not and finally, do not be afraid to refuse to give credit!
2. It’s a good idea to carry out credit checks on new customers, particularly if you don’t look for payment up front. Try some of these sources: Local knowledge; Company – recent accounts from CRO; Register of judgements; Online ratings and Trade references.
You don’t necessarily have to pursue all of these avenues but it is important at least get some feedback, and then follow it up if you discover any causes for concern.
3. Once you are happy with your checks, you should agree payment terms and credit limits with customers before accepting an order or starting the job: Agree payment terms at order stage – confirm them in writing to avoid any confusion later; Ensure your standard payment terms are printed prominently on your invoices and other relevant docs.
Payment terms should include: The credit period offered; Details of any discounts or rebates; Whether your prices exclude carriage charges (“ex works”) and the like; Whether you charge interest on late payments and if at what rate; and – where appropriate – include a “retention of title” clause – stating that the goods remain your property until paid for.
These simple steps will help minimise payment issues before they arise, but if you are facing serious problems with late payments or non-payments, then do seek professionalsupport. It could save your business!