Keeping on top of credit control is an essential part of any business operation if cashflow is to run smoothly and the bottom line maintained.
There will come a time in the life of most businesses when the threatening letters have to cease and the actual threat carried out. Those customers keen to hang on to their loot for as long as they can know full well the difference between a heartfelt plea and the long arm of the law when it falls through their letterbox and are often experienced players of the ‘long game’.
Legal action however does cost money and so it’s no surprise that the owners of small businesses would rather avoid it if possible.
Things may be changing though.
It’s in the post M’lud
Whether it’s a sign of a more aggressive approach on the part of the UK’s SME’s or an indication that the late payment epidemic is spreading is not clear but there has been a sharp rise in the number of smaller cases going to court.
A recent survey of 27,000 small businesses has revealed a 23% increase in the number of CCJ’s brought by them between the first and second halves of 2015.
Furthermore the average amount of these claims is a little over £4.5k which may not sound like a lot to companies higher up the scale but is a significant sum if it covers a weekly wage bill. And with the National Living Wage about to put more strain on that area for many businesses, it could have even more significance.
Same message, different language
“He who shouts loudest gets heard” or “don’t ask don’t get” may not be phrases found in any Institute of Credit Management guide but they can act as a useful aide memoire once the goods have left the warehouse.
Many may wonder why it should even be necessary to have to ask in a loud voice at all when a timely raised invoice with a clear due date on it should be sufficient to secure payment.
In the real world however the ability to coax cash out of a customer at some time even remotely close to the due date requires a reasonably structured procedure with regular monitoring. It’s an important job but also one that some SME’s fear might have a negative impact on a relationship if done too well.
Who’s running your dunning?
It’s also an activity that can take away valuable man hours that could be spent on business development. And for businesses of a size where the administration department bears a striking resemblance to the sales, purchasing and finance departments then it becomes a real issue.
One answer of course is to outsource the job to professionals who have the systems, the time and the experience to alter the landscape of an aged debtors report without offending those used to languishing in the oldest column.
Firm but fair is the way to collect outstanding debts and consistency and regularity should help avoid the need to seek the court’s assistance.
Any doubters should remember one thing; the culprits who continue to inhabit the old column will have eaten up any margin expected when the original sale was agreed anyway.