Marc Jones
Atradius UK
Ask the Expert: Cash and debt risk management
All answers are for general guidance only. Each case must be handled on the individual facts.
Q. What advice would you give to companies that want to organise a good cash and debt risk management system?
Most importantly, clearly set out your receivables management practices from the start so that everyone has the same expectations. And be thorough. We advise our customers to do the following:
Contract - set your terms of trade clearly at the outset and stick to them. Include a clear statement of interest charged on overdue accounts and where appropriate, indicate retention of title terms for unpaid goods. Ideally, get the purchaser to sign them with their order.
Be observant – whilst credit checking prospective customers is the norm, it doesn’t help with your long standing buyers – look out for warning signs, such as slipping payments, unsigned cheques, or rapidly changing staff.
Be prompt – ensure all billing is timely, correct, and has a clear “pay by” date.
Follow-up – follow up three days after sending the invoice to ensure that they have received it. This reduces the opportunity for claims that the invoice hadn’t arrived if you are chasing payment later on.
Overdue invoice – call the day it becomes overdue to see if there is a problem. The only excuse for non-payment is not having the money. Be polite but firm and point out that interest is now accruing on the invoice.
Document all calls – keep notes of every conversation and summarise in writing by fax or email after each.
The cheque is in the post (1) – ask them to put it in first class post and call again after three days. With the phasing out of cheques it is likely to become “the transfer is on the way” – the same three day rule applies.
The cheque is in the post (2) - this time, request a scanned/faxed copy of the signed cheque, so you know that they have written it and intend to pay. Alternatively ask for the cheque number/ fund transfer reference.
Visit – if they are local, call and tell them you will pop in at a specific time later that day to collect the outstanding balance. Be prepared to wait.
Write a letter – if they are too far away to visit, write a letter stating the facts (no matter how furious you may feel). Draw attention to your terms and conditions of trade and itemise all activities you have undertaken chasing payment – calls, visits, emails, faxes etc.
For additional free advice on managing your domestic and export trade credit risks, go to www.atradius.co.uk
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About Marc
Contact Details
Marc Jones
Head of Sales,
Atradius UK
marc.jones@atradius.com
02920 824 777
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