Amongst the many causes of financial challenges encountered by businesses and retailers in recent years, payment of invoices is one not so often talked about. Unpaid invoices, while often not the primary cause of difficulties faced by businesses and high street retailers, can only compound the array of factors contributing to further financial woes.

If you allow your customers to exceed your agreed payment terms, you are giving them an interest free loan and jeopardising your cash flow. The key to keeping your cash flow under control is to have a robust collection process in place and the right people contacting your customers.

Once you have delivered the goods or service, call your customer and make sure everything is as they expected. If there are any issues, deal with them quickly before they escalate. However, if all is in order, politely ask the customer to confirm your invoice is included in their next payment run. The details of the call should be recorded in detail: track the name of the person you spoke to, the da te and time of the call and the agreed outcome/plan of action. Making sure your conversations are recorded is important because if the invoice is not paid, then you have a record of what agreed between the parties and therefore what action should be taken.

It is important to keep an eye out for warning signs that your customer may be struggling to pay their debts on time, or if they have no intention on paying them. Gone are the days where your clients can claim “the cheque is in the post”, as they will have newer systems in place. If your clients are struggling to pay their debts, then there are some important questions that need to be considered: 

  • Has the customer made a promise of payment which has not been met? How over-due on their repayments are they?
  • Have they changed banks? Whilst this should not be considered a negative reason, it is worth being alert until payment is received.
  • Has the customer changed the company name, or recently incorporated into a limited company? Either of these should prompt your credit controller to open a new account under the new name, and fresh credit checks undertaken. If Mr Smith trading as Smiths Garages is now Smiths Garages Limited, they won’t have a credit history as they’re a new company, so you may want to ask the Director/s for a personal guarantee if you are prepared to offer credit.

If you work with a third party who can provide you with a robust debt recovery service that ties in with your internal credit control cycle, strict timelines are followed which should support your cash flow.  The right partner will give you credit management advice and support with your internal collection process, making sure it meets your business needs and those of your customers.

We all know cash is king, and in these uncertain times (I am not going to mention the “B” word), it is important to ensure appropriate systems are in place to keep businesses running smoothly. Whilst clients won’t always pay their debts on time, having a good system in place and procedures to catch a late payment early is important in maintaining business confidence and management.

If you are in a position where your customers failure to pay is affecting your ability to pay your suppliers, you should take advice at the earliest opportunity. By securing advice early, you can ensure the appropriate steps are taken quickly and mitigate the impact felt across the business.

Jayne Gardner, Partner and Head of Debt Recovery at Corclaim