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Avoiding the seven deadly sins

Direct Route

27th January 2014

Economic Advice & Solutions

THERE are seven deadly sins of credit management - but equally, there are ways to avoid them.

In this column, we're going to look at three of the seven, with the other four to come in our column in March's edition of Business Times.

1. If you don't know who you're dealing with...  it can tie you in knots. You are chasing that overdue debt but you are getting nowhere. The information you have on the debtor is incomplete. You can't hope to successfully collect all monies that are owing to you in the longer term if you do not know the exact legal entity of the debtor you are dealing with - is it Fred Bloggs Limited OR Fred Bloggs UK Limited OR even Fred & Martha Bloggs trading as Fred Bloggs?

Fail to determine the right information and you're unlikely to elicit any sympathy or resolution in a court of law. You may end up writing off wasted court fees and your actual invoices in some cases.

The AccountAssyst new customer account opening facility can help.

2.  Terms and Conditions are absent or barely there  

Startling but true - many businesses have inadequate terms and conditions, or worse still, none at all. When the going is good and you are being paid and, there are no glitches in your supply chain, it's tempting to overlook the importance of terms and conditions.

But, they are crucial when relationships turn sour with a customer or a customer queries an order. You should have basic Terms and Conditions in place as an integral part of your process when offering credit to other businesses.

Ideally your terms and conditions should specifically and clearly have been acknowledged and agreed to in writing, or similar, by your customers before trading commenced.

All too often small medium businesses risk their entire stability for the sake of saving £500-£1000 with a solicitor for watertight Ts and Cs!

If you don't have any terms and conditions the AccountAssyst credit account opening facility provides an immediate 'stepping stone' solution.

3.  Sloppy Paperwork and Lax Administration    

 It's unlikely that you will be consistently paid on time, every time, if you are lax with your paperwork. Sometimes you may not even get paid at all.

 Errors on your part that can lead to you not being paid on time include:

 • setting up your customer's details wrongly on your accounting records - common mistakes being name and address/typographical errors,

 • failing to quote order numbers on invoices

 • unsigned proof of deliveries (or time sheets)

 • a failure to make clear and get specific

Attention to detail is paramount. When did you last check an order received from a regular customer to ensure it was from the exact entity you had set up on your accounting records?

Don't fall foul of any unscrupulous practices or ordering systems engineered to have you unwittingly supplying a lesser established company as the fall-guy just in case a project goes wrong.

Wherever possible, your credit limits and dealings should always be with the company within the group that is financially able to pay out even when a financial problem occurs with their trading division.

Direct Route provides both the prevention of bad debt with AccountAssyst and the cure with The Fairway debt collection service, offering a zero cost debt collection service.

Contact Ken Brown 07795 214426, email kbrown@directroute.co.u or visit either www.directroute.accountassyst.com  or www.directroute.co.uk