6 Effective Debt Collection Tips
1) Make sure your terms and conditions are watertight.
You terms and conditions need to be regularly kept up to date, and preferably reviewed by a Solicitor. Ensure that your customer has a copy of these terms before you conclude with your contract. It is not advisable to simply attach these to your invoice, unless you have already sent them at the point of contract. Also ensure that you have a clause within your terms to legally add on any debt collection charges should you have to outsource your account to a Debt Collection Agency and then it will be your customer that has to pay such costs rather than yourselves. Make sure that English Law applies in the event of any dispute, or Scottish Law and if you are based elsewhere, the relevant law for your Country. If you are in any doubt at all, Jack Russell and our Solicitor Partners can check these terms and conditions for you.
2) Accurate credit checks.
It would be extremely unwise to give customers credit without actually checking the amount in the first place. Either, sign up with a reputable credit reference agency as this could save you thousands of pounds in the long run, and if the credit risk score is particularly poor then only deal with such customers on a cash only basis or via credit card transaction. Also check that you are not dealing with a Company that has Directors which have been involved with a previously failed Company as this again would be extremely risky. Know who your customers are as well, for example Jack Russell Limited or Mr Jack Russell and Mr John Russell t/a Jack Russell Associates. These are examples of two types of business where one is a Limited Company and the latter a Partnership. You may also be dealing with a business which is a Sole Trader or Sole Proprietor.
3) Is your invoice accurate?
Make sure that you show your terms of payment clearly on your invoice and also quote if you have retention of title to your goods. This is particularly applicable to businesses who are supplying goods rather than services. Ensure that your Company’s registration number is quoted as well as the VAT registration number so that the validity of your invoice cannot be challenged on these points.
4) Effective credit control and telephone follow up.
Always telephone your customer once your invoice has been sent out to make sure they have received it so they cannot use this as an excuse for non payment. Make sure that you have the contact name of the customers Director, Credit Controller, or the person responsible for signing their cheques and authorising payment. Have a properly structured telephone follow up system. Suspend the customers account as and when necessary, although do try and maintain good relations as far as possible. Do you really want to have a customer who pays you regularly way after their normal terms and have caused you a lot of time in the chasing thereafter? Perhaps they would be better off working with your competitors!
5) Statutory Demands.
These can be extremely useful with debts that are undisputed and are over £750. It is important however that they are personally delivered rather than just sent by Royal Mail so that there can be no dispute over whether the demand was actually received by your customer. This is where experienced Legal Process Servers are both a necessary tool and are extremely cost effective – Jack Russell can provide you with such a service on a Nationwide basis for generally around £75 – £95 + VAT.
6) County Court Proceedings.
Again, it is worth running a further credit check before proceeding to such action just incase your customer has already become insolvent. Furthermore, although such action can be taken online we would encourage you to use your local County Court service, not only to try and preserve some of the local courts that are fast going out of existence due to government cuts, but more importantly that from our experience they provide a much better and reliable service. Make sure you include not only the Statutory or Contractual interest that you are entitled to within your claim, but also the appropriate compensation fee under the Late Payment Act. Jack Russell can once again assist you with all of these tasks.
In summary, it pays to have a proper and effective Credit Control and Debt Collection system in place. If you have any further enquiries, please contact us on the above number or alternatively via email on firstname.lastname@example.org.