Good credit control is essential these days for any size business, whether big or small. Here are some tips from Naomi Dunleavy, a leading cash flow and credit management specialist which will hopefully help some of you through the hard times.
Check that the customer Can and Will pay within your terms before supplying on credit
To determine if they Can pay within your terms -
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Look up their last filed accounts
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Ask them to complete a bank reference form which quotes the customer’s requested credit limit. The form basically asks their bank if they have sufficient funds, in general, to meet that amount
To determine if they Will pay within your terms
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Ask them to supply you with 3 trade credit references from suppliers that trade at a similar level to what they will be trading with you
Other good practices
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Your terms should reflect the risk associated with a client
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Your standard terms should be “30 days from invoice date” Not “End of month following invoice”
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Put your terms and bank details on all invoices
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Send timely invoices and monthly statements
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Put as much relevant details on the invoice as you can e.g. ordered by, purchase order no. etc
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If you give trade discount, change it to cash discount
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Phone for payment don’t just rely on statements and letters – Get someone else to make the calls for you
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When chasing overdue accounts, remember the 3 P’s
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Phone, Progress your calls, Pass on delinquent accounts
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Only charge interest on overdue accounts (Interest on Late Payments Regulations 2002) on delinquent accounts. Otherwise, you are implying that you accept late payments.
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Don’t be afraid to barter if your delinquent credit customer genuinely can’t pay. Better that then have to wait indefinitely for payment and/or incur expensive legal fees if suing.
Compliments of ABC Bookkeeping Solutions© Advice . Bookkeeping . Cash Flow Management www.business-solutions.ie 046 95 498 17 / 086 854 1189
