Debt Claims - 5 Practical Tips
In these problematic times, cash flow is vital to a company's continuing existence. Debtors must be chased to help strengthen a company's liquidity.
Here are 5 practical tips you can follow to ensure this is dealt with in the best possible way:
1. Have a monies upfront policy:
a. Make it a company policy to ask for money upfront before carrying out the work involved.
b. This is ideal if you offer a professional service.
2. Know your client well before accepting the job:
a. Can he/she pay?
b. Run credit checks – are they liquid? Do they have assets?
c. What do the public documents available on Companies House say about their financial situation?
3. Terms and Conditions – the contractual terms:
a. Ensure you have thorough watertight Ts&Cs which you sign with all clients before beginning a new job.
b. We can review and offer advice on the drafting of Ts&Cs
c. Ensure Ts&Cs are issued to client before invoice is issued - such as on the catalogue or sent as a separate document.
d. Do not print your Ts&Cs on the back of the invoice – they cannot be relied on – send Ts&Cs before sending invoice!
4. Take interest for late payment into account:
a. Ensure you make it clear in Ts&Cs that you will be claiming interest and the rate which you will be claiming.
b. If not, you have the right to claim interest by law at 8% above base rate.
c. Send a separate "interest only" invoice when the debt becomes really overdue.
5. Have an efficient and robust debt recovery procedure:
a. Send a chaser letter after 7 days of an outstanding invoice.
b. Send a chaser letter after 14 days of an outstanding invoice.
c. Send an "interest only" invoice for a bill that is really late.
d. Call in the lawyers if the debtor client still has not responded.
e. Act promptly and early – the sooner you act, the better.
If you have any queries or want any advice, please do not hesitate to contact Stefan Arestis on 020 7749 2700 who will be happy to take your call.