At Coodes, we recognise the challenges businesses face. Here are 10 invaluable tips for effective debt recovery and prevention.
In the diverse business landscape of Cornwall, the consequences of unpaid invoices can be severe, jeopardising the financial health of businesses. Cash flow disruptions not only threaten the viability of a business but also demand valuable time and resources to recover outstanding accounts.
At Coodes, we recognise the challenges businesses face. Hayley Blatch offers 10 tips for effective debt recovery and prevention.
1. Know Your Customer:
Understanding your customer’s financial status is paramount before entering into any agreement. Conduct credit checks where possible and, if uncertain, consider requesting upfront payment. Knowing your customer’s creditworthiness can help you make informed decisions that minimise the risk of non-payment.
2. Clearly Communicate your Terms and Conditions (Ts & Cs):
Transparent communication of your terms and conditions is essential to debt prevention. Provide written quotations or estimates alongside your terms of business. Ensure that your invoice and terms are sent simultaneously, covering aspects such as payment terms, late payment penalties, interest rates, retention of title, and any applicable early payment discounts.
3. Set Credit Limits:
Establishing credit limits helps mitigate risks. Stick to these limits and insist on clearing outstanding balances before undertaking additional work for the customer. Regularly review credit limits as the trading relationship develops, adjusting them accordingly.
4. Chase Quickly:
Initiate the debt recovery process promptly. Send reminders and statements ahead of the payment deadline. The more timely your communications, the higher the likelihood of receiving payments. Swift action demonstrates your commitment to maintaining financial discipline.
5. Open Communication:
Maintain open lines of communication with your customers for the best chance at debt prevention. Picking up the phone and discussing outstanding payments can often resolve issues more efficiently than written communication. Be willing to compromise and explore mutually beneficial solutions to ensure a positive resolution.
6. Interest and Compensation:
Clearly communicate the potential consequences of late payments. Advise customers of the inclusion of interest and compensation under the Late Payment of Commercial Debts (Interest) Act 1998 if the matter is escalated to legal proceedings. This knowledge can serve as a powerful motivator for timely payments.
7. Build Relationships:
Cultivate strong relationships with your clients. A positive and collaborative relationship can lead to better communication and a higher likelihood of resolving payment issues amicably before they escalate to debt recovery measures.
8. Utilise a Solicitor for Effective Debt Recovery:
Consider employing the services of a solicitor for debt recovery. At Coodes, our specialised debt recovery team boasts a high success rate, with a significant percentage of customers settling their debts promptly upon receiving a formal letter. This approach can also help preserve your business relationships.
9. Assess the Debtor’s Financial Viability:
Before pursuing legal action, assess the debtor’s financial status. Only proceed with legal proceedings when confident that the debtor has the means to settle the debt. Consult with debt recovery specialists to obtain asset profiles through a Tracing Agent if needed.
10. Look out for Limitation Dates:
Be aware of limitation dates regarding invoice debts. Court proceedings must be initiated within six years from the date of the invoice. Keeping this timeframe in mind ensures that legal options remain available if other debt recovery efforts prove unsuccessful.
Navigating the complexities of debt recovery demands a proactive and strategic approach. By implementing these ten tips, businesses in Cornwall can enhance their chances of getting paid on time, while also safeguarding their financial stability.
At Coodes, we stand ready to assist with specialised debt recovery services tailored to the unique needs of businesses in the region. To find out more, get in touch with Hayley Blatch from our Commercial Disputes & Employment team via email or call: 01872 246217