Four ways to avoid writing off bad debt

16/05/2017

While late or non-payment is well known to be adversely impacting businesses in many ways at present, one particularly disturbing trend lies in the proportion of companies having to write off turnover as uncollectable.

Much of the focus and statistics surrounding late payment within the media and government assumes that the customer does eventually pay. But it would appear that there is a significant proportion of businesses who don’t receive a penny on a regular basis.

Non-payment can occur for a number of reasons, but the likelihood of this can be mitigated through thorough credit management strategies. Here are four tips we think will help you to avoid what must be considered a last resort:

1. Credit checks

Debtor insolvency is a common cause of non-payment. The importance of knowing your customer before offering credit terms has therefore rarely been so important, and credit checks offer a valuable way to gain an accurate picture. Remember to do this with any new customer, but also regularly throughout your relationship with them as their position could change at any time. Here are just a few of the pros and cons of credit reports.

2. Review your account opening form

Something that’s often overlooked in credit control best practice is a detailed account opening form. This is your first opportunity to get as much information about your new customer as possible that you can use to get an accurate credit report, as well as all of their contact information for the credit control process. This will allow you to be as close to them as possible in the event they don’t pay within the agreed credit period, and serves the added bonus of preventing them from disappearing – which is another common issue.

3. Don’t forget your terms and conditions of sale

Unresolved disputes can also lead to non-payment. Often, however, a business isn’t even notified by a customer of any dispute until deep inside – or beyond – the agreed credit terms, whether it’s genuine or not. There are two ways to avoid this. The first should appear in your terms and conditions of sale; stipulate that any disputes must be raised within a specified period of receiving the invoice. The second is to make a courtesy call as soon as the invoice is sent across, confirming that the amount is correct and verbally notifying them of your clause regarding disputes. Additionally, this allows you to confirm receipt of the invoice and reaffirm when payment is due.

4. Consider specialist support

The cost of outsourcing the collection of an unpaid invoice is meagre compared to the cost of writing it off altogether. Deciding when the time is right to do so can be difficult, but it’s important not to let unpaid invoices grow too old or the collectable value of the invoice will decrease rapidly. Debt collection agencies such as Hilton-Baird can work on a basis whereby any debt which exceeds a certain length of time beyond terms is transferred, helping to bring a swift result whilst reducing the impact chasing those invoices has on your credit control team’s wider activity.

Do you have a debt you’re particularly worried about? Get a debt collection quote to find out how much we would charge should you decide to instruct us. Alternatively, give us a call on 0800 9774848 to find out more about how we can help.