10 tips for
avoiding bad debts
Bad debts can be
a serious hindrance to your cash
flow and profitability. Sometimes
this can be crucial to the success
or failure of your business.
Here are some
tips for preventing a build-up of
bad debts:
1.
Obtain a credit reference on
the organisation that you intend to
trade with
2.
Avoid doing business with
companies whose credit rating is
poor
3.
Ensure that the other company
knows your payment terms at the
outset
4.
Invoice at the earliest
opportunity
5.
State the payment terms
clearly on your invoice
6.
If payment is not received by
the due date, send a reminder as
soon as possible, and certainly no
longer than one week after the due
date. It is good practice to have a
policy to chase the debt after a
fixed number of days following the
due date
7.
If there is still no
response, chase up the debt by
telephone. This will enable you to
determine whether there are any
queries on the invoice and, if not,
to discuss a date for the
settlement
8.
Write to confirm the agreed
settlement date and send by email,
fax or post
9.
State clearly that the matter
will be referred (after the agreed
extended period) to either:
·
A
debt collection agency
·
A
firm of solicitors, or
·
The
county court small claims department
10. If the debt
is still due after this, keep your
word and take action
Make it easy for your customer to
pay promptly
There is no law
that says you should send out
statements and invoices only once a
month. Send invoices at the time of
delivery, and make sure they include
a detailed breakdown of the charges.
This will help eliminate delays when
payment becomes due.
Include a
stamped, addressed envelope with the
statement. Research suggests
customers pay faster when you do.
And have an appropriate message
printed on the back of the envelope.
Remember, everything is marketing –
even invoices and statements!

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