3 Legal Terms Explained.
Liquidation. – Liquidation is the process of the ending of a company. This can follow a Winding Up Petition from the court. When a company is in Liquidation, all the assets are distributed to cover outstanding debts. After this, the company ceases to exist.
Insolvency. – Insolvency means you are unable to pay your debts. You will become insolvent when your losses consume your surplus assets.
Solvent. – Whether a company is solvent or not depends on the liquidation status. A company in liquidation is not solvent unless the directors can declare they can pay all creditors within a year.
“Our credit control, that’s dealt with by Mrs Stanage
She only comes in once a month, that’s all she can manage.”
- Effective phone calls. Have you got the right person making the right calls? A Credit Controller should be firm but fair. Credit Controllers need to be able to take the rough with the smooth and to expect to be shouted at – debt is an emotional subject. Aid consistency by assigning Credit Controllers to customers so they can monitor the payment process effectively and personally as it develops.
- Ensure you keep proper history notes of the best day and time to call. Voicemails can go ignored or be avoided. Avoided calls equal avoided payment.
- Have a proper structure and procedure. Call your customer once the invoice has been sent to make sure it has been received. This will be seen as courteous and is also smart practise as you will know if they are choosing to ignore it if payment doesn’t happen following confirmation of receipt.
- Deal with queries quickly and don’t allow customers to withhold the whole debt if a small credit note could resolve the problem.
- Issue regular, clear statements followed by at least one reminder and a final demand.
- Put the customer on stop if you are supplying an ongoing service or goods to encourage them to make payment, save your resources and prevent further owings.
- If you agree to any instalment arrangement, ensure that you put this agreement in an e-mail or letter of confirmation. Make sure you keep a copy of any cheque payment made by a customer paying in instalments.