In any business, no matter whether you are big or small, cash flow is king. One of the best ways to ensure your cash flow is consistent is to be in control of your bad debt, but this can be a real challenge as most businesses suffer from late payment of invoices by customers.

Typically, late payers make a lot of excuses and we are sure you will be familiar with some of these common late payment excuses:

  • We haven’t received the invoice
  • We don’t have a payment run until next month
  • There are no cheque signatories available
  • We can’t pay you until we are paid
  • We can’t pay the invoice as there is a dispute on the account

Most businesses will have at some point heard these and other excuses from customers. But what can be done to ensure that the late payers do not disrupt cash flow?

Well actually there is quite a lot and it starts with having a robust credit policy. This policy defines all credit activity from granting credit to debt recovery. This should also define the extent of the debt recovery process performed in-house and also the use of external debt collection specialists (such as Wright Hassall’s specialist Debt Recovery team).

An external debt collection specialist can add a great deal of focused expertise and capability in collecting outstanding amounts. They will do this in a more cost-effective manner than can be done in-house.
Choosing the right business to work your accounts can be a minefield, but always try to find a regulated debt collection agency that works on a “no recovery, no fee” basis.

Regulation could be from the Credit Services Association, Solicitors Regulatory Authority or, if your debts fall under the Consumer Credit Act 1974 (amended 2006), then ensure the agency is authorised by the Financial Conduct Authority (FCA). This is a good sign of professionalism and that they will work to the highest possible standards which, importantly, will in turn protect your reputation.

By following a robust process to manage bad debt effectively (including seeking specialist external support), the impact of late payers can be considerably mitigated.

About the author

Phil Wilding Partner

Phil specialises in volume debt recovery including asset finance recoveries, book debt collect outs, consumer and commercial debt recovery, residential mortgage shortfall, former tenant arrears, former staff debts, club and membership collections, and pay day loans.