7 tips to improve your prospects of recovering your debts

Cash recovery is vital at any time but in the present economic conditions, it is more important than ever to be able to collect debts quickly and effectively, writes Silverman Sherliker partner John Abbott. But time and time again, the same failings mean that the debt recovery process can become more difficult and time-consuming than it should be. Delay and increased costs are a result of poor practices and delay can result in cash flow difficulties.

These seven tips can assist you and your solicitor to recover your debts:

1. Properly and accurately identify your customer. You are only going to get paid if the invoice is properly addressed. Frequently, invoices are not properly addressed and it is not clear who the paying party should be. Make sure that you know the correct name and address of the customer and that it is shown in full on the invoice.

2. Make sure your terms of business have been properly incorporated into the contract. You may rely on your terms of business to enforce issues including payment terms and interest or retention of title provisions, but you may find that you will not be able to rely on such provisions if you cannot show that they form part of the contract. Terms of business appearing on the back of invoices are no use at all. If they are to be relied on, terms of business must be brought to the attention of the customer before the contract is entered into, not after it has been performed. Put terms of business on your quotations, estimates, confirmation of order forms, in your brochures and on your website and refer the customer to them.

3. Have a dialogue with your customer's accounts department. Speak to them and find out when they have your debt scheduled for payment or e-mail them shortly before the debt is due to be paid to remind them. They will realise you expect to be paid and paid promptly. Be persistent but polite.

4. Have an established process in place internally, e. g. first reminder 14 days, second (stronger) reminder seven days, then solicitor’s letter.

5. Do not delay. Old debt is difficult debt. Take proceedings early: you have more chance of being paid that way.

6. Identify problems early – do not ignore them. If the customer has raised a complaint regarding the goods supplied or services provided, try to address those complaints. If you are aware of a problem, do not simply instruct your solicitor to collect the outstanding invoice. Inform him so that he can advise you how to tackle the problem and so that he can address and hopefully resolve the problem early on.

7. Carry out credit checks on your customers. Assess the risk you are taking and evaluate your credit limit for the customer.