Do you have a credit management plan for the winter?
With high inflation and interest rates contributing to a ‘Cost of Living Crisis’ comes increased tightening on your cash flow as debtors will take more time to settle their invoices and unscrupulous debtors will use the crisis as cover when the truth is they have never had it so good.
Here are things to consider for the winter:-
Review your Process.
Do you have an effective credit management process? Things to consider are:-
- A comprehensive Credit Application Form backed by a reliable credit referencing facility. You’ll be surprised just how many calls we get from business owners that can’t tell us who is liable for the debt, this would not be the case if they could refer to a Credit Application form completed by the individual or company that accepts liability for the account.
- Personal Guarantee. In the thick of Lock Down against the background of failure of the company debtor we were able to acquire a CCJ and successfully enforced the same against the guarantor that guaranteed the debt.
- Letter cycle. Emails and telephone calls have their place but in a digital age where you can block emails and incoming telephone calls, a letter is king. This is further backed by the Civil Procedure Rules where service of legal documents by post is standard.
- Consider the wording of your letters and/or emails, follow the rule ‘Escalate to Accumulate.’ With all your letters and/or emails ensure you confirm how debtors can pay providing all the relevant details. Choose phraseology that fits how you wish to come across while at the same time making it clear what the consequences are for non payment.
- Terms and Conditions. Do you have a comprehensive set of Terms and Conditions incorporated in the Credit Application Form agreed by the applicant to help resolve customer disputes and manage debtor insolvency to avoid leaving you exposed ?
Resource.
Do you have competent, reliable and cost effective resource in place to collect debts? Indeed legal proceedings for the recovery of debts should not be expensive. The rule of thumb is this, you should not be charged more than 35% of the sum claimed to issue legal proceedings. If you are, now’s time to change your legal or debt collection service provider.
Speed.
Make it a rule unless a debtor delivers on their Payment Promise proceed to the next step in your process quickly. Indeed we are advising our clients where viable to acquire a CCJ or issue bankruptcy or winding up proceedings as quickly as possible to ensure other creditors do not get paid first.
Decisive.
Do not be afraid to make tough decisions. Decisive businesses are successful businesses. Consider this, a debtor that is liable for a debt at 120 days old or more has no bargaining power. Don’t forget that, certainly if they try to impress upon you the business they gave when the bottom line is they never paid for it. Be assertive, stand up to these debtors. With the right resource and process in place being assertive is just a matter of ‘escalate to accumulate.’
Need Help ?
If you need help with a Winter Plan call award-winning credit professional and commercial lawyer Carlo Pegna today on 01920 481467 to find out what Master Collections can do for your business