Updated: Feb 22
As JSP Credit Management fast approaches its 1st birthday, some time reflecting on content we have written over the last 10 months led us to recall our blog from 9th July 2021 titled Growing Pains. In that blog, we wrote about some of the challenges associated with being a newly formed business, or first time entrepreneur and how to turn them from a weak point, into a strength of the business through a bit of good old honest self-reflection.
We probably stand even more strongly by that belief today than we did back in July last year, having naturally experienced a few more challenges since then and thankfully also been on the receiving end of some very wonderful business-related experiences. We have a funny feeling that those two elements of light and shade will continue to flirt with each other for as long as we remain in business, which we hope is a long time!
Change is usually painful. As humans, it seems we are inherently driven to find our own personal zone of maximum comfort by default. Though many of us will also hopefully know, through their own experiences two things; first that when we step outside of that personal zone of maximum comfort it feels uncomfortable, and second that when we have endured that initial discomfort we often feel better than we did when we started.
Therefore, as a company, we really do not have a guilty conscience about being challenging of the status quo when companies come to us with problems associated with late, or non-payment. It has nothing to do with simply wanting to put people or processes down. It is purely based on an awareness of the fact that to achieve the best possible results in credit management we need to be honest about what is not working.
One of the most common, and justified reasons that we hear for a lack of attention to good credit management practice is down to a lack of resources. When we say resources, we usually mean time and money. Without money you cannot pay to employ staff to look after this for your business, and without time you cannot get round to do it because you do not have anyone employed to do it for you. This is particularly pertinent to smaller businesses (or micro entities).
So, lets address one of them issues right now! Investment in credit management can cost a great deal, granted. Some companies credit departments overheads costs millions (but probably save them billions), but for a small business it does not have to break the bank and in this blog we are about to set out some cheap but very important steps that any business can take to protect themselves from potentially having problems with late paying customers later on down the line.
What we come across regularly as providers of debt collection services, are poorly drawn up terms and conditions that pay little attention to the potential for late payment from a customer. It is very difficult after a transaction has already taken place under those terms and condition to then implement some deterrents to late payment such as adding interest and charges which were not included in the T&C’s.
Spending some time to re-visit your terms and conditions to ensure that your credit terms are set out clearly and the consequences of those obligations of your customers not being met are also clearly laid out will help further down the line should problems occur with the timeliness of payment to your company once you have already incurred the costs involved in providing your customer with your produce or service.
The next one is one that we have mentioned a few times previously. We hope you therefore see the importance we place on it. When a customer (another company) approaches your company making enquiries about one of your products or services you can do some free initial checks on them via Companies House which will give you access to various useful pieces of information such as their current status (active, petition to strike off, or in liquidation etc).
It may or may not surprise you to learn that we have been instructed to act on matters that involve a debtor that has already been dissolved as a business, or is in the process of being struck off by companies house. Equally this source of information can provide you with an insight into their financials by looking at their latest filed accounts. It does have some limitations though as it will only work for UK-based private limited companies so if your customer is a sole trader, another method will have to be used.
As part of your sales process, you need to also be asking your customer for their email address. Even if you work at a trade counter or a shop floor. It takes less than a minute to take a customers email address down and it can prove to be a very useful tool later on in instances where the customer has stopped replying to your attempts to take payment and appears to have changed addresses and your mail is not being answered.
Another benefit to having your customers email address is that you can email their invoice to them rather than relying on our sometimes-unreliable postal service to ensure it gets there and it also removes the excuse that the invoice has not been received, providing you have sent it to the correct email address of course. Email software systems like Microsoft Outlook give users the ability to request delivery and read receipts when you send an email so you can verify it has been received.
Another one of the most common pitfalls when it comes to effective cash-flow management is not getting around to chasing up your unpaid invoices. This something else that we have mentioned previously too, and we understand that challenge only too well. Often times for small businesses there are a seemingly endless amount of conflicting commitments, but there is arguably nothing more important than ensuring that your business has got cash in the bank so a simple tip for ensuring you make time for that at some point through your working week is to set reminders on your computer calendar to chase them up when they become due.
It may not seem like a lot in terms of how many changes we are proposing you make to make your businesses become a lot more efficient in the credit management department but what we do know is that over the last 17 years these are the most common issues, and therefore if some effort is expended to ensuring these are resolved then we can quite confidently say that this will fix most of the credit management issues your business faces. We cannot account for the customer who is dead set on not paying here but we do that in another one of our blogs.
There is a great deal more to be considered when it comes to great credit management, but we hope we have given you a brief insight into some of the important and contemporary factors that need to be considered. If you are interested in knowing more or wish to have a chat about a particular area of uncertainty then get in touch for a free no-obligation discussion at www.jspcreditmanagement.co.uk or contact us on 01827 66820 to discuss your needs.