Debt Collection Issues
12/10/2009
The current recessions appears to have given large organisations an excuse for late payments, and can be a huge strain on smaller company's cashflows. In a survey of the Federation of Small Business, 34% of its members agreed that they had seen an increase in late payments over the previous 2 months.
The Late Payment of Commercial Debts (Interest) Act 1998 provides small businesses with a legal framework to pursue late payers, and charge interest on any such debts which stray over the agreed credit terms. However, this may strain the relationship between customer and supplier beyond repair, therefore most prefer not to use it.
On average small businesses are made to wait an average 41 days over their agreed credit terms before payment is received from the ‘Big Named' firms. Many have renegotiated their credit terms from 30 to 60 days, whilst some have agreed a 10% settlement discount for paying within the 60 day period. The FSB has written to several of these ‘Big Named' firms urging them to sign upto the government backed ‘Prompt Payment Code'.
Our Credit Control Tips
- Credit references should be taken for any new accounts. This may include references from Credit agencies.
- Advise credit terms in writing to all new accounts. Consider reminding existing customers in writing on an annual basis of your credit terms.
- Send accurate statements to customers within 2 working days of the month end.
- Telephone request for payment after 30 days. Take a note of the name of the person dealing with your request, and if the invoices have been authorised for payment. If required send copy invoices & related documentation.
- First letter requesting payment after 45 days if telephone call is unsuccessful. Be persistent and telephone again. Try and speak to the person you last spoke to. Consider putting the account on ‘stop'.
- Second request letter 60 days, and further telephone call.
- Final request
For further information please contact one of our specialist team on 0161 493 1930