When Should I Use Debt Collectors?
In these tough and precarious economic times, there is a very real and rapidly growing culture of late payments in the UK.
For business to business transactions, most firms automatically expect 30 days credit. In fact, if you don’t agree different terms, the law says businesses can take 30 days to pay by default.
If you find yourself lucky enough to be supplying services or goods to very big companies, you will sometimes find they demand 60 or 90 days to pay, or maybe even longer. Often those long payment terms are then passed down the line by over-stretched suppliers, so it is the very small businesses at the bottom of the supply chain that suffer the most.
The biggest problem with this culture is that many businesses see it as perfectly acceptable to extend their 30 days to 35 or longer – without prior permission. It can be a real strain on your cash flow to be waiting yet another week for cash that’s rightly yours!
One of things you can do to improve your cash flow is to be up front with all clients about your willingness to use a debt collection agency, should acceptable credit terms be stretched without permission.
For many businesses, just receiving a letter from an organisation of professional debt collectors is enough to trigger a swift payment. There are clear processes you can follow to help you get paid on time, and know exactly when it’s right to pass the debt onto an agency.
First off, you need to be utterly clear with clients upfront about the terms and conditions of the product or service you supply. You should get a set of standard Terms & Conditions drawn up, and ensure they have a clause laying out the credit terms you offer, and the process you will follow if those terms are broken. At Federal Management, we offer free guidance and assistance on this.
You can also reduce your risk by running credit checks on new customers before you start dealing with them. It may seem like you’re slowing the sale down, but you’ll appreciate discovering potential problems before they happen. Prevention is better than a cure and this is why we strongly recommend that all companies vet their customers prior to giving credit. At Federal Management, we strongly recommend that you use Creditsure, who offer the UK’s fastest and most cost effective credit checking service.
Prior to using the Debt Collectors, it is sensible to send your customer a final letter politely advising them that they have broken the terms of the agreement and advising what the potential repercussions could be, i.e. the debt being passed to a debt collection agency thus incurring further costs . Also, make them aware that they cannot order more from you while a debt is still outstanding.
That way you can try to maintain a good working relationship with the client by affording them a final opportunity to resolve the matter without the use of a 3rd party agency. Finally, if you have followed this advice and still not been paid, it really is time to call in a debt collection agency. Many businesses stop at this point. But the reality is if you keep threatening action and don’t follow it through, there is no incentive for your client to cough up and you may as well simply wave goodbye to your money.
If you have followed your credit chasing process through to the point of a final letter, the advantages of using us to continue chasing the debt are clear. We have the time, resources and expertise to focus on the recovery of your monies and this allows you to focus on the most important thing which is running and operating your business. Federal Management operates a low cost service and eliminates the stress one associates with ‘chasing people for money’.
