When you start out in business one of the first things you should do is write out a ‘Credit Policy’ outlining your payment terms and the stages that you will use to make sure you have done everything to ensure you are paid to your terms.
Inform your client when you want to be paid and once you have supplied the goods or completed your work obtain either a signed timesheet or written confirmation that your client is happy with the service / products received. If you are dealing with businesses, it would be wise to check their credit rating before offering them credit terms. There are a lot of companies out there that offer credit check facilities.
This is the point when you should raise an invoice confirming the terms agreed; if you haven’t offered any credit terms then payment should be made to you straight away; happy days!!
However, if you have agreed that your client can take time to pay whether it is 7, 14, 30, 60 or even 90 days (if you can afford to offer that length of time) you should diarise a note to remind you. What should you do now? Ask your client to pay you: this may sound like a daunting task to actually ask for your money; but guess what, it’s yours!!
Your customer pays you on time and everyone’s happy but what happens if you don’t receive ‘YOUR’ money on time? Well this is where the next stage of your ‘Credit Policy’ comes into play and it may look something like this: –
- Contact your client and remind them that payment is due and request your money
- If payment not received within 3 days then send 1st reminder letter or email informing client that payment not received and that their remittance is required.
- Assuming payment has still not arrived a 2nd chasing letter or email goes to the client saying that unless payment is received in 3 days; you will consider taking further action.
- After 3 further days and still no payment you could send a final letter called ‘Notice Before Proceedings Under County Courts Act’
- Hopefully, the thought of legal action spurs your client into paying you.
- If your client doesn’t pay you by the date mentioned in your final letter, what should you do? Well you have informed them that you would be taking legal action so unfortunately, you have to take the next step and apply to pursue the matter through the courts. You may want to give them a quick call first to inform your client that you are serious and will be taking legal action if they don’t pay today!#
In most cases your client will pay you on time but you have to consider your options and what time you will give your client to actually pay you.
It is not recommendable to let your clients know that they have more time before you will take legal action because you are basically telling them that although your terms are 30 days you will allow them another 30 days before you will instruct solicitors or start proceedings yourself.
Always, always, always keep on top of your customers (debtors) and make sure you are paid on time; a lot of businesses fail due to bad cash flow.
If you would like help preparing a ‘Credit Policy’ or need some advice on bad debts or court action please get in touch by calling us on 020 3633 1340, emailing email@example.com or via our website www.cainandbeer.com