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Service: General Membership
 
Date: 25/01//2013
 
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A Credible Approach



What are your operational procedures?


Do you accept an order, deliver the work, send out an invoice and then await payment? For the majority of businesses this is standard practice but is it ‘best practice’?


Ian Carrotte, proprietor of ICSM, the subscriber-based credit information specialist dedicated to the UK printing industry, says this places the onus on the customer to pay once the job is delivered and subject to payment terms that can often stretch out to as much as 90 days – almost a quarter of a year after the work was produced.


It is only when the invoice is overdue that too many businesses begin chasing payment, creating an unsustainable gap between job completion and final payment.


To ensure you get paid in a timely manner for the work you have delivered, establish a best practice that everyone in the company is aware of and adheres to.


Next you have to explain it to your customers. Far from offending them they will be reassured that you have such measures in place and much more likely to meet payment deadlines.


We are all guilty of being too wary of chasing payment, afraid we may upset our long standing customers but what is the real cost of avoiding the issue? A good past relationship does not ensure a rosy journey into future. If they are they are under pressure, then they are unlikely to share this information until it is too late to take action.


Creating a best practice also helps you chase any late payments by professionally communicating expectations and action steps that will be followed. It is a highly professional way of telling your customers how you will work with them while also safeguarding your cash flow and the long-term success of your business.


Your best practice should include:

  1. Payment terms with clearly defined Terms and Conditions that means customers will be expecting outstanding invoices to be followed up on.
  2. A Credit Account Application Form signed by ‘a duly authorised person’ who accepts the Terms, with particular reference to prompt payment
  3. Credit Reference Agency checks for new and regular customers helping avoid any potential bad debt even from those businesses you have a long-standing relationship with
  4. A direct reference to ‘prices subject to payment within our Terms’ on every priced document (e.g. price lists, quotations, etc).
  5. A clear reference to prompt payment at the start of every new job or contract with any customer-requested deviation from your standard Terms confirmed in writing before work starts.
  6. An annual adjustment to credit applications for all active customers.
  7. Avoidance of being subject to the buyers Terms as printed on any written order, by sending an Order Acceptance ‘subject to your Terms of Sale’.
  8. Regular reviews of payment patterns keeping an eye on times and delays as well as a move from BACS to cheques as these can highlight subtle shifts.
  9. Commitment to moving away from a culture of late payment with direct payment methods or more creative collection strategies.
  10. Monitoring of CCJs and reviewing the relationship before extending credit.
  11. Being aware of when customers submit their accounts – late submission could indicate trouble.
  12. Regularly checking company details that might uncover significant changes such as who is on the board and any alteration in the addresses of those members. For smaller or new companies, cross reference consumer and business information to build a picture of those running it.
  13. Reviewing emerging market and cross industry trends that can impact the business. The warning signs can be a better indicator than any internal procedures and controls.
  14. After sending out a large invoice, call to confirm receipt and acceptance of the invoice to highlight any problems early on. If there are none you can confirm the payment date.
  15. Call customers as soon as an account becomes overdue, saying the payment cannot be traced which requires a specific answer.
  16. When the terms, as detailed on your invoice, pass send an account overdue letter. Seven-days later send a final demand and seven days later initiate full recovery. Maintain constant communication in between these steps.
  17. Maintaining communication with the customer throughout the process to ensure they have had ample opportunity to take the right action. This will help address any legal obligations and may even achieve a swift and happy resolution.
  18. Knowing when to call for help. A chat with one of our experts could help you identify the next most appropriate step perhaps using one of our legal letters requesting a prompt response. This is often all that is required.

Problems with payment can be the result of many factors – some outside the control of your customers. Having a best practice in place is designed to highlight any potential problems and address them as soon as possible giving you time to take appropriate action.


This protects your business but also your relationship with your customers and enables you to takes a more professional and unemotional approach to achieve a mutually agreeable conclusion


Using third parties, such as ICSM, to chase debts will almost always result in faster returns as your debtor is more likely to recognise and respect a professional procedure and pay the money owed.


For more information or if you have any questions please contact us on:


0844 854 1850


Tel 0844 854 1850 ___ Fax 01454 318 517 ___ Address ICSM, 51 Broad Street, Chipping Sodbury, Bristol, BS37 6AD
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