Newspaper article Evening Gazette (Middlesbrough, England)

Make Them Pay

Newspaper article Evening Gazette (Middlesbrough, England)

Make Them Pay

Article excerpt

Byline: Keith Robinson, Partner, Keith Robinson & Co, Middlesbrough

For many years, there has been talk of giving greater protection to small to medium-sized enterprises when it comes to the issue of late payment.

New laws introduced several years ago giving the statutory right to claim interest on late paid commercial debt appeared to many to be a logical step but on closer inspection, as many in the accounting industry warned, the ineffectiveness of such measures has become increasingly apparent.

Let's look at this from the perspective of an owner-manager. You've worked really hard to win a large contract.

The contract has run smoothly and it's time for them to pay. Three months after you've invoiced, however, there is still no sign of any cheque.

Yet with the prospect of more business on the table, are you really going to risk jeopardising this new business relationship by demanding interest on the amount due?

The short answer for most business people is no. But what business people can do is learn from such a scenario.

First and foremost, so many small firms fail to recognise the crucial importance of keeping on top of invoices.

It may sound obvious, but it's vital to make sure that invoices go out promptly. Many companies simply fail to grasp this most basic rule of effective credit management.

Smaller companies need to find a regular slot to do their invoicing. They also need to establish a system and stick to it.

Establish terms of payment early on and chase the client as soon as payment becomes due. Make enough time for reminders at short intervals.

If you have clients that come to you and say they have a cashflow problem, try to agree a payment system up front for this.

With larger companies, it's so important to know what their payment system is.

Yet you won't necessarily establish this by hassling the managing director. You need to find the right person in the business to speak to. But there are preliminary measures you can also take to guard against late payment. Firstly, ensure you carry out a thorough check on a new customer's creditworthiness. …

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