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Having bad debtors is damaging to cash flow and can be extremely dangerous for any business.
Techniques to avoid bad debtors include:
Obtaining a credit reference on the organisation that you intend to trade with
Avoiding doing business with companies whose credit rating is poor
Ensuring that the other company knows your payment terms at the outset
Invoicing at the earliest opportunity
Stating the payment terms clearly on your invoice
Sending a reminder as soon as possible, if payment is not received by the due date and having a policy to chase the debt after a fixed number of days following the due date
Chasing up the debt by telephone if there is still no response. This will enable you to determine whether there are any queries on the invoice and, if not, to discuss a date for the settlement
Writing to confirm the agreed settlement date and send by fax or post
Stating clearly that the matter will be referred (after the agreed extended period) to either a debt collection agency, a firm of solicitors, or the county court small claims department