All businesses rely on cash flow to survive. At Lovetts Solicitors we specialise in helping businesses recover debts. Here are our five Top Tips on enhancing recovery.
By Michael Higgins, Managing Director of Lovetts Solicitors - this article first appeared in the Evening Standard in September 2018. You can read the newspaper version online here.
1. Get a signed contract or credit account application form
Good terms and conditions will strengthen your position when a customer pays late. There’s a misconception that if you refer to your terms on an invoice, these terms will apply to the contract. This isn’t correct and a signed credit account application form or contract is best practice.
2. Refer to your terms in an email footer
More and more business is done by email, meaning contracts can be formed during email correspondence. To ensure incorporation of your terms, make it company practice for everyone to have an email footer referring to your T&Cs.
3. Create a credit control and debt-collection policy
Statistically, the majority of your customers will pay late. Ensure you have a credit control and debt-collection policy. It’s good practice to call a customer before your invoice becomes due to check the invoice has been received and is on a payment run. Not having an invoice is the number one excuse for late payment.
4. Have a specialist debt-recovery solicitor as a supplier
Unfortunately, some customers will have a policy of not paying until they receive a solicitor’s letter in order to protect their own cash flow. At Lovetts, we offer a Letter Before Action (LBA) for as little as £1.50 plus VAT. This secures payment within 86% of our cases without the need for further legal action. The perception among 58% of businesses is that chasing late-paying customers through solicitors could damage the relationship. This fear is unfounded as our clients often continue to trade with their customers after our LBA has been sent and payment secured.
5. Retain control of your debt collection even if you see a solicitor
Once you pass your debts to a solicitor, it shouldn’t mean you lose control. Lovetts’ online CaseManager portal allows clients to give instructions, obtain reports, and view all of their cases 24/7.
Above all, taking a measured but proactive approach to cash flow is key. This is the lifeblood of your business, and putting a professional recovery process in place can enhance business growth and success.