Key tips for businesses to minimise unpaid debt and maximise cashflow

Unpaid invoices are a challenge for any business and when debts due are not paid on time (or at all), this can have a crippling effect on a business regardless of its size. It also inevitably causes a ripple effect where unpaid sums due to one business can affect its cashflow and its ability to repay its own liabilities on time.

We set out below some simple steps that a business can take to minimise bad debt and improve cashflow.

Ensure there are clear payment terms

It is vital that your clients know, from the outset, the scope of work you are undertaking, how much it will cost, when an invoice will be raised and, crucially, the payment terms of that invoice. Your terms should also indicate what the consequences will be if payment is late (i.e. cessation of services, addition of interest and costs and escalation to legal action). Ensuring that this information is provided at the outset in a clear and coherent manner will minimise the risk of disputes and delayed payments.

Invoice in a timely manner and chase at the earliest opportunity

It goes without saying that the quicker you invoice for services rendered (or goods provided), the sooner you will get paid. Ensure that you have an efficient invoicing system in place so that invoices are generated and sent out at appropriate times each month. A dedicated process to invoicing at regular intervals will ensure a consistent influx of cashflow. It is equally important to ensure that you schedule reminders to chase overdue invoices promptly. In most instances a client may simply have forgotten to pay and a timely reminder will resolve matters but as a general point, prompt follow up on unpaid invoices shows your clients that you take your payment terms seriously.

Have an effective credit control process in place

If a client does not pay after an initial reminder, ensure you have a clear process in place of dealing with late payments including phone calls and written reminders. You should avoid continuing to provide goods and services to any client who is in arrears as this will inevitably just increase the debt exposure to your business. Often, the cessation of providing goods and services to clients will, in most instances, extract payment.

Seek legal advice once the credit control process has been exhausted

In circumstances where, despite your best efforts, invoices remain unpaid, you may need assistance from solicitors to pursue the debt on your behalf and commence legal action to seek recovery of sums owed to you. Our experienced team is on hand to provide commercial debt recovery services to businesses to assist in the recovery of sums due to you including, where appropriate, interest and costs, and we act on behalf of various companies, where our services have become part of a business’ own credit control process. Click here to read more about how we can assist.