Debt Management and Debt Planning
It feels like the media are announcing the loss of a UK big name brand every week. Both small and big business are being affected by these loses as they are left out of pocket. Even those companies many of us used to consider to be ‘untouchable’ businesses are equally having extreme financial worries.
Every business will at some point experience bad payers and outstanding debts, it is often this important issue that can have a significantly negative impact in causing the business to fail. Although this is just one of many factors, it does have a serious impact on cash flow which is one of the most important aspects of a business’s financial standing.
Financial planning can be difficult especially when you are not in control of a number of factors, especially how well your clients pay. It is beneficial to put a plan in place for when times are tight, as this will reduce your response time and ultimately might save your business from going deeper into financial difficulty. One of the ways to at least alleviate the stress from not being paid on time is to review and implement a robust credit control procedure.
A robust credit control procedure is paramount in keeping the cash flowing into the business and to reduce the likelihood of you being unavailable to pay your own debts and having to extend your own credit terms with your suppliers. It is important that you have a clear credit control policy when allocating and reviewing customers credit applications. This will help you get paid on time and reduce your bad debt. It is important that you make the right decision when allocating customers, a credit facility.
This policy should give recommendations on how accounts should be monitored, how the information is confirmed and the minimum number of attempts to be made to contact customers by telephone and email. It is also important that you have a way of logging and documenting this information.
Third Party Credit Control
Third party credit control can come in many forms.
One option is through invoice financing. This where your company sells its accounts receivable to a financial institution, they then give you around 80% of your invoice value and the remaining amount once your client pays the invoice (minus your fee). The most important requirement to qualify is to have invoices from creditworthy commercial clients. However, it does rely on you having good credit worthy customers, if not then you may find it difficult securing funding as well as facing reimbursing your creditor for failed payments.
Another option is outsourcing to a third party for your credit control services. Chasing payments is necessary but it can be very time-consuming and takes up a lot of resource especially for a small business. This is especially the case when the person in charge of credit control often has responsibility of all the financial running of the business. While automation can remove part of this problem, you’ll still need someone to oversee this process and monitor it. Despite automation becoming more prevalent, clients will still require human interaction and in many cases the personal touch. As well as resource, many small businesses simply cannot utilize expensive credit software and systems or have the experience to effectively use them. Outsourcing means that you can take advantage of ultimate resources, access to these systems to help maximize the efficiency of your credit control processes delivered by your preferred third-party provider.
Outsourcing your Debt recovery can assist your business on so may levels. With this in mind, it is difficult to understate why you would engage with a third-party debt recovery provider to help on those invoices you need help getting over the line.
Here are just a few reasons why people use a commercial debt recovery provider.
Experience and Expertise – Debt recovery providers are well versed in the law and what you are legally entitled to claim on late payment within “The Late Payments of Commercial Debt (Interest) Act”. It requires no further training of staff for the more technical or challenging recoveries. You are also gaining the experience of expert negotiators and who are well versed in dispute resolution.
Faster and More Cost-Effective – Recovery of invoices out with their credit terms will always be delivered quicker through a third party. This is because we have all the necessary expertise on hand, systems in place to effectively chase your debts. We are targeted on the speed of your recovery.
Always Professional – Being a professional organisation and taking pride in representing your business and establishing your brand. We also take out the emotion out of the situation and we judge everything on its own merit in a business environment.
Fixed Fee – All fees are agreed in advance to ensure you know exactly what it costs to recover the debt. However, 70% of cases your fees will be paid for the debtor. Making our services free of charge. Not only have you received your money quicker but there is no charge to you.
No Upfront Cost – Our services are viewed as risk free because we do not charge you upfront for our service, there are no deposits or long contracts, we can be instructed on a case by case basis. Our fixed fee will only be chargeable if you receive a payment from your customer. Regardless of how long we have worked on the case for you. If we don’t recover, then you can walk away and you don’t owe us a penny.
No matter what your business or industry you must be prepared for the possibility of late payment. The most important aspect is to start planning now and don’t wait until you need to instigate your plans, because in many ways it will be too late. You should have something in place and there is no better way to help ensure your plan is robust than engaging with a third party who has the expertise in this area. If you need any help with outstanding invoices or commercial debt recovery; call Darcey Quigley Co today on 01698 821468 or email [email protected]