This is the first in a series of articles written by Krystene Bousfield, Solicitor and Head of Debt Recovery at Travlaw . During the coming months, Krystene will delve into the sometimes uncomfortable, but 100% necessary, world of debt recovery, providing tips, advice and helpful assistance to enable you and your business recover monies to which you are entitled – be that from suppliers or customers.
This series of articles is very much intended to be interactive, so please ‘Like’, Comment and get in touch with any feedback or specific queries you may have.
THIS WEEK – “Keeping a tidy house”
I don’t know about you, but when I receive a household bill or an invoice that states “payment due in 7 or 14 days”, I know that I need to make payment on or before those 7 or 14 are up. I don’t wait for the gas or electric company to call me up and then explain “oh, I only pay my bills on the 30th of each month, so you’ll have to wait”. No, I know that I have been provided with a service and I am contractually obliged to make payment in accordance with the agreed terms. If I do not, they have every right to take action against me.
Pretty straightforward it would seem.
Why then, is it ‘ok’ for suppliers or clients to use this excuse when paying (or not paying) invoices that are due to your business? A service has been provided, payment sums and terms have been agreed, and you are now entitled to what you are owed. Yet so many businesses feel guilty or uncomfortable about chasing suppliers despite the fact that they are perfectly entitled to do so.
From experience, there are three general responses from businesses that find themselves in the above position:
- They do not even realise that the invoice is overdue, perhaps as a result of poor credit control.
- They note the outstanding invoices but feel awkward in contacting the supplier, choosing instead to write off the balance due.
- They take a hardline approach – If payment is not made, they give 7 days’ notice and then proceed to take debt recovery action.
Needless to say, those that respond in line with number 3 have much healthier accounts and, furthermore, their suppliers know in future that payment is to be made on time, without delay and without excuses.
“Credit where credit’s due”
It is of course understandable that commercial relationships come into the equation and, in some instances, businesses have in place different terms of repayment with certain suppliers, depending on the strength of the business relationship. This is fine, and indeed encouraged, however it is vital that such agreements do not work to the detriment of your company and the overall state of cashflow within the business. We are all too aware of the issue experienced by many agents working with Thomas Cook and pipeline monies that could not be recovered due to the ‘credit’ position that had been agreed. Agents believed that entering into a credit agreement with a company as large and commercial profitable as Thomas Cook was ‘failsafe’; hindsight proved to the contrary.
Internal procedures
The vital thing to ensure within your business is that both you and your suppliers / customers are fully aware of your payment terms, as well as the consequences of not complying with the same.
Agree internally whether there is to be a ‘grace period’ whereby if payment is not received within the stated time, a standard reminder will be sent allowing a further 7 or 10 days for payment.
Thereafter, the decision is whether you wish to write off the debt, continue spending time and effort chasing the balance internally or commence legal action to recover what you are rightfully owed.
If you would like assistance in drafting a standard ‘late payment’ reminder letter or wish to discuss your internal debt recovery processes or the option of commencing legal action, please contact Krystene Bousfield.
Next week’s Article …
“Know your Debtor”
This article was originally published on: 27 January 2020
