In my last blog entry, I talked about the ‘early warning’ signs for bad debts. In this blog I will provide some tips on how to manage debtors:

• Devise and document a formal invoicing/credit control policy, which staff are trained to adhere to.
• Issue invoices as soon as possible - customers are more likely to pay on time if invoices are raised promptly.
• Send statements each month, identifying any overdue invoices. Please note that this can not be relied upon in isolation – a co-ordinated strategy is a necessity – perhaps involving calls, emails and even text messages. 
• Begin the credit control review process early – not when the invoice reaches 60 days…
• Make it simple for your customers to pay you – the invoices should include a date, your bank details, a clear payment deadline, your interest on overdue accounts policy and contact details. Both debit and credit cards should be accepted.
• Monitor and chase unpaid debtor accounts weekly – a methodical approach is required, and this differs from business to business, and even customer to customer. You do not want to upset your customers, so start delicately and gradually increase pressure, always remaining polite. Involving different people in the collection process is an advantage – with each having a different relationship with the debtor. There are a wide variety of collection approaches / tactics that can be adopted – speak to an advisor if you feel you need guidance.
• If the verbal approach seems like it will not work, put it in writing and consult a collection agency.
• It is important to maintain regular two-way communication with your ‘at risk’ customers. You should aim to be first on the list when your debtor is planning their next payment run.

In our next blog, we will look at when a bad debt provision can be recognised and the tax relief claimed.

Julian Dobbin is a partner at Mercer & Hole. The views given in this blog are personal to the author.

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The lack of available finance in the economy has meant that businesses are increasingly looking to their suppliers for credit. 

The result of this for many SME’s is a build of trade debtors (and a wide range of excuses given to their credit controller). With this backdrop, it is fundamental for SME businesses to recognise the early warning signs of debtor problems – for example:

• industry rumours that the debtor is experiencing financial difficulties
• debtor’s sector adversely affected by macro-economic trends (such as those experienced by retailers over the last year)
• payment terms change/payments are missed
• management at the debtor become elusive and do not return calls/other correspondence.

Late invoices should be flagged to senior management as soon as they become overdue. Unless it is an immaterial figure, the account should then be reviewed weekly – the likelihood of collecting an account reduces as each day passes.

In my next blog I will provide some ‘best practice’ guidance on how to manage slow paying accounts.

Julian Dobbin is a partner at Mercer & Hole. The views given in this blog are personal to the author.

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