March 15, 2017

Tips for a comprehensive credit policy

On average, 1 in 6 invoices remain unpaid after 90 days and of these, almost half have yet to be paid after 6 months.

Late payment can cause considerable cash flow issues, especially when the late payers are large customers.

We recommend that all businesses have a credit policy in place with clear guidelines that set out your terms and conditions. This should include terms of payment of your invoices to keep your cash flow running and to avoid a high volume of debt.

1.    Use an account credit application form to keep details of your customers
2.    Check your customer’s credit ratings
3.    Clearly set out your payment terms
4.    Set up a procedure for non payment of invoices in line with your payment terms
5.    Decide on Contractual, Statutory or Late payment Interest for overdue invoices
6.    Third Party Fees should be incorporated into your terms and conditions so you are covered if a customer’s account is overdue
7.    Ensure your terms and conditions are up to date
8.    Call your customers to ensure they have received the invoices and that there are no issues to be raised
9.    Make sure you review Aged Debt and your customers are chased regularly for prompt payment of invoices

Pitmans Law are experienced in supporting businesses in building a credit policy that’s tailored to their commercial needs.

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