The economic climate is causing people to tighten their belts, and some small- and medium-sized businesses are at risk, unless they have proper management controls in place.
Much too often, businesses find themselves facing financial difficulty, despite having a thriving order book.
One of the common reasons for this is that the business itself has failed to invest in proper controls and systems to collect debts due and on time.
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Some customers will readily use this to their own advantage, particularly if they know that the business is unlikely to take any steps to impose any penalties for a delay in payment.
This passes all the risk over to the business to absorb. A business terms of trade' or terms and conditions' will often fall short of what is necessary to protect itself. It's important that such terms are tailor-made, so they suit your business needs. For instance, you may find your business could benefit from obtaining deposits - in which case, you need to consider how much is paid and when and whether such deposits would be refundable. Alternatively, you may seek payment in advance.
Not only do bespoke terms and conditions mean that money comes in at the most appropriate time for you, but your business can also entitle itself to penalties such as costs of taking steps to recover monies from your customer, and other such tricks.
Simply having such terms tailor-made for you business isn't sufficient. You also need to ensure that they're included in contracts with customers, and the business must bring them to customers' attention from the outset.
In the case of internet businesses, you shouldn't let the customer proceed with any purchases without accepting your business terms.
Training is a vital process in avoiding debt, and your business should also follow a strict invoicing and a diarised credit control system. Just knowing your customers can prove a significant benefit in managing debt. You should find out as much as possible about them and whether they're credit-worthy.
If you need to take things further, we find that customers usually pay up, once a solicitor is appointed and a demand letter is sent on your behalf.
As readers may appreciate from this short column, it is important to seek legal advice on managing debt recovery. Lemon & Co Solicitors has a dedicated Debt Recovery Department and operate a fixed fee service.
Contact Nita King, partner and head of Litigation at Lemon & Co, on 01793 527141
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