MISTAKE 1 - TERMS & CONDITIONS

Most terms of business are no more than ‘Take what you want and pay if you feel like it'. They are boring ‘admin'. Many firms, especially smaller ones think it's better to concentrate on sexy sales and make money.  ‘Terms' are usually given little thought to begin with, and then ignored. 

And when things go wrong there is no Good Fairy to sort things out. It's a cruel world and  businesses are expected to know that. Many would agree that old etiquettes of paying within 28 days are simply disappearing, and now it's quite common not to pay unless chased.

So if this sounds familiar, it's important to sort out your paperwork early on. Carry out a thorough investigation of the terms & conditions which accompany each transaction ( or should).

Areas to audit include:

Retention of Title

Maybe you have an ROT clause. Try enforcing it and you're in for a shock. Most are worthless. Take advice and find out how to make yours work.

Signature

Even the best terms are useless if they don't apply at all. Evidence of consent to your terms is critical. Making sure you get a simple signature is the biggest single weapon you have.

Interest & Charges

Usually you will not want to impose ‘penalties'. If things go sour however you will. They may help cover your costs. Leave them out however and nobody will donate them.

MISTAKE 2 -  LEGAL

Companies are slow to pass matters to solicitors mostly because they want to avoid the bill themselves here! It's another cost on top of an already slow payment, and so is not attractive. But this can be a false economy.

Winding Up/Statutory Demands

This may seem like a very big stick but it's not court-related. Where a debt is clear, severe measures are justified. These include winding up the company. Similar remedies are available against individuals. A threat will nearly always generate the payment, if it's  done properly.

Letter Before Action

Cheap, speedy and shocking. It cuts through the ‘run around' while you get on with business.  LBA's resolve most matters. Use your terms to recover the cost expended from your debtor.

Claim

The Small Claims Court (limit £5,000) is very user friendly and a solicitor is not essential. You don't need to decide at the outset if you will use one throughout, but professional help with the Claim Form and at key stages will may well pay dividends.

Remember that ‘Legal' doesn't always mean ‘Court'. Staying away from solicitors may be a false economy if you miss an easy deal that requires very little intervention as a result.

MISTAKE 3 - EVIDENCE

Think Legal. Claims succeed by proof. The better your paper trail, the better your recovery.

All too often discussions are not noted. Chasing calls are not on file. This creates a messy oral dispute and undermines your claim. Before you know it, you are fighting an unnecessary battle mostly of words.

In that battle the debtor will say ‘I told them I was unhappy. They just didn't make a note of it.' If your records are poor, the Judge may believe him. The result is simply confusion.

So always ensure that your file is meticulously detailed and credible.

COMMERCIAL

Companies are loathe to spoil commercial relationships by getting too ‘heavy' with debtors. This comes up time and again, but does this make them mugs ?

In my opinion the answer is possibly, if they are taken for a ride. Good credit control shouldn't conflict with good relationships. In fact it can make them easier. Everyone knows where they stand and it is clear that you run a serious  and credible business.

In any event, without the security of good practice,  companies are asking for problems. In tough times like these, someone will always use others' weakness to give themselves an edge. Another ninety days' credit could make a big difference.

All companies should -

      •   Audit their practices and procedures

      •   Learn how to optimize their weapons

Michael Morse

Tel: 0113 225 8811   

E mail: mmorse@godloves.co.uk

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