Monthly Archives: January 2017

effective credit control

Effective Credit Control

I have read some quite shocking reports recently regarding just how much debt is written off by businesses. It does beg the question as to whether (OR NOT) businesses have an effective Credit Control procedure in place.

Credit Control is the life blood of any business

Credit Control isn’t considered by many to be important.  Most business will focus on producing the product or providing the service, which is important, of course.  That said,  Credit Control is the life-blood of any business and must be treated as paramount. If you give your customers/clients terms then you must have controls in place to ensure that monies owed to you are being paid in a timely fashion.

Too many businesses are reactive rather than proactive. Our top tip is to be ahead of the game – sending out a statement once a month as a reminder is simply not good enough. Get your credit controller making those calls and establish a rapport with your clients. They won’t mind getting a follow-up call regarding payment and when it might be received. You should not be embarrassed about asking for monies owed to you – you have earned it and your client will admire you for your Accounts Department’s efficiency.

Why you should claim Late Payment Interest and Compensation

According to research conducted by BACS in 2015, “over three quarters of UK businesses suffer from late and non-payment of invoices. The payment giant, which processes millions of electronic business payments every day, found that an astonishing 76% of businesses are being affected by late payments of up to 6 months beyond agreed contract terms.

BACS also revealed that in companies that are suffering from late and non-payment:

  • 20% of directors have been forced in to taking a pay cut
  • 26% have had to increase bank overdraft use
  • 23% have no choice but to pay their own suppliers late”

* Source http://www.debtadvocate.co.uk/the-effect-of-late-payment-on-business/

The effects of late payment can be extremely detrimental to the  economic health of a business and its owners.

The Late Payment of Commercial Debts (Interest) Act 1998 was introduced to compensate creditors for the late payment of debt and to deter late payment. It only applies to the commercial supply of goods and services where you don’t have a provision for interest in your Terms of Business.

In brief, it enables you to claim interest and compensation for invoices that are not paid on time.

You can claim Late Payment Interest and Compensation if:

  • You have supplied goods and services
  • Your buyer bought for business purposes
  • The contract is not governed by a consumer credit agreement

You don’t have to tell your customers that you will claim Late Payment interest or compensation if they fail to pay on time before they have actually breached your payment terms. However, it may be beneficial for your cash flow to tell them in advance of your intentions, should payment be made late. You could put warnings to this effect on your invoices; your statements and in your terms of business.

Full details of how much you can claim can be found on our website: http://www.acquit.org.uk/claiming_late_payment_interest_and_compensation

 

Image-courtesy-of-Naypong-at-FreeDigitalPhotos.net_.jpg