If you have an invoice template, it might be tempting to include your payment terms and conditions template as a part of it too – but it’s important to keep your payment terms and invoice separate.
That might seem counterintuitive, as the invoice is a request for money, and your payment terms naturally govern how that money is paid to you, and when, and what happens if it’s late.
Incase you were not able to attend here is our webinar from Thursday last week titled Keep Your Cash Flowing.
In a competitive economy, it’s important to make your finances a core priority of your overall operations, but knowing the correct credit control approaches for new businesses can be a challenge all of its own.
Bigger companies can simply hire a credit controller and an entire finance team if necessary, but as a new business you probably don’t have that luxury from day one.
So what credit control approaches for new businesses can fill that gap – and which methods might prove to be a long-term solution right from the outset?
Payment terms agreement templates are a great way for small businesses to know how to enforce their payment terms on customers of all sizes, without leaving any wriggle room for them to get out of paying.
Your payment terms agreement sets out not just your standard deadlines, but also the action you will take if payment is not made on time – including penalties and fees you might want to add on top of the original invoiced amount.
Having standard terms and conditions in place helps you and your customers to know where you stand – and equally importantly, what will happen if something goes wrong.
That might mean that you fail to deliver what you have promised, or it could be that the customer claims you have failed to do so, even though you consider that you have fulfilled your side of the contract.
Naturally, there is a slight difference between Ts & Cs for consumer contracts and those for business-to-business deals.
As we often say, cash flow is the life blood of SMEs – even one late-paid invoice can leave you unable to meet your own outgoings – and protecting yourself against such an eventuality is all about putting in place the right payment terms for small businesses.
Companies formed in the 21st century – commonly referred to as Generation Z businesses – are causing credit control confusion for lenders due to their typical lack of tangible assets, reports Experian.
The credit risk management insight provider explains that historically, start-up companies have often borrowed against tangible assets like manufacturing machinery to cover the other costs of setting up in business.
Just because you have lost contact with a debtor, it does not mean you have lost the option of chasing the debt – but the clock is ticking to take action before the debt becomes statute-barred.
In most cases, if six years elapse without you making contact with the debtor, you lose the legal right to pursue for repayment of the debt.
However if you have a debt that is, for example, five years old, you have a year to attempt to track down the debtor and get them to acknowledge that they owe you the money, which can in turn reset that six-year clock.
Finding a debtor
Finding a debtor who has disappeared is no easy task, but professional outsourced credit control companies can offer a tracing service to relocate a runaway debtor.
There are many different ways to do this, from public records like the phone book, to simply checking whether they left a forwarding address or changed the registered office of their company – and again, when you enlist the help of outsourced credit control companies, they will know all the tricks to try on your behalf.
Once you find the debtor, it is a case of making sure they acknowledge the debt before time runs out, so let your credit controller guide you on how best to go about doing this.
Collecting money owed
If you can get even just a small repayment towards the debt, it can prevent it from becoming statute-barred, giving you another six years to recover the rest.
Significantly, you can often add statutory interest to the debt for the full time since it became overdue – and that can add a substantial sum to the total amount you are owed.
Whether you try to recover this full amount, or you use it as a negotiating tool to encourage the debtor to pay you what they originally owed, it is a valuable bargaining chip.
Your credit controller should be able to help you work out exactly how much you can pursue the debtor for – so once they are found, you are ready to move quickly in order to achieve progress and avoid becoming statute-barred by the six-year time limit for action.
If you would like to talk to a member of our team comment in the box below or call 0808 149 3275.