6 ways to avoid bad debt on Debt Collection Awards day!

It’s the “Debt Collection Awards” today – who knew there was an awards ceremony for that?

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To maintain a healthy business and avoid bad debt, not only do you need to get paid for the goods or services you provide, but you also need to get paid on time. So, to reduce the risk of having to call the debt collectors, here are some tips:

1) Check your customers’ creditworthiness – you can use CreditHQ (it’s free), to search for the companies you trade with and find their credit worthiness. The lower the credit indicator, the greater the risk of a company facing financial difficulties.

2) Set credit limits – often smaller and younger companies will have a lower score, which doesn’t necessary mean they won’t pay, but you can consider setting a lower credit limit until you are confident that they can and will pay on time.

3) Know when you should get paid – manage your cash flow by forecasting when invoices are due and keeping an eye on any changes in payment patterns and delays with your existing customers.  For new customers who you are yet to trade with, check when they are likely to pay you. Search for the company on CreditHQ and look at the payment indicator – the lower the number, the greater the risk of a company paying their bills late.

4) Monitor the companies that you are trading with – you can set up an account on CreditHQ (did I mention, it’s free!), and create a ‘Watch list’; you’ll then get alerts when credit or payment indictors change for the companies that you are watching, so you’ll know if who you might need to chase for payments.

5) Give clear terms – make your terms visible to your customers by publishing them on your website, on your invoices and send a copy to your customers upfront. Include a clause stating that you continue to own the goods or services until they have been paid for.  You could offer discounts for payments made within 30 days, and charge interest on anything over (you’re legally entitled to), but if you chose to do this, make sure your terms specify this.

6) Manage your invoicing processes:

  • Send invoices on time.
  • Make sure you find out the right person or department to send the invoice to, and request an acknowledgement that it has been received.
  • Keep up to date records on who owes you what and when.
  • When an invoice is due, chase it.
  • Stop supplying customers who don’t pay on time.
  • Resolve any disputes quickly – payments are usually withheld until the customer is satisfied.
  • If you have customers who regularly pay late, increase the prices that you charge them, or cancel any credit facilities.

If you don’t get paid, even after chasing, then here’s what to do next..

Before you go down the debt collection path, try one last time to recover the debt yourself, phone and write to the customer and let them know that this is your next course of action, as this may be enough to get them to pay. Also try and find out why they haven’t paid, as it may be a problem with their accounts system, or they may be having problems, and you could agree a repayment schedule.

Decide if the amount is worth pursuing – it may not be worth your time or the cost to collect, so let it go and move on.

4105722502_a442444bb9_mIf you do decide to pursue the debt, then use a debt collection agency, or take legal action using a solicitor or via the small claims court (https://www.gov.uk/make-court-claim-for-money/overview). A reputable debt collection agency can chase late payments in a professional manner, without alienating the customer.

Make sure you check the costs – there may be a flat fee or a percentage of the debt recovered, or both, and ask about additional charges.

Don’t delay chasing any bad debt and good luck. Please do remember to reduce your risk though, by knowing your customers better – use CreditHQ to check them out!

If you on the other end of the debt collection process, and are being pursued by debt collectors, then here is advice on how to deal with it: http://www.money.co.uk/article/1009025-how-to-deal-with-debt-collectors.htm

3 ways to avoid being haunted by scary debt and bad credit this Halloween!

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Whether you’re a brand new small business or a more established SME, one of the main worries facing all business owners, has to be building up your credit score and avoiding getting into debt. Here’s a few tips to help you on your way…

1) Know your own credit score. It’s vitally important to be aware of how your company’s financials are reported when potential traders and customers are searching for you. If you don’t like the look of your credit score, are other people going to want to do business with you? If you’re looking for ways to improve your credit rating, take a look at our post on ‘how to get a better credit rating for your small business’

2) Be aware of your payment terms! On sites such as CreditHQ, companies’ payment terms are included as part of each business’s financial insights. Even as a basic free subscriber, people can search for your company and see a green, amber or red indicator as to how good or bad your business is at paying its customers and suppliers on time. If you need some cashflow management tips, check out our post about cash-flow projections

3) On the flip side, when you’re investigating who to trade with, the payment indicators (and more detailed reports if you become a Standard paid-for subscriber), allow you to see which company is likely to pay you on time. If they’re likely to renege on their payment terms, you can ensure you set shorter terms or limit the amount of credit you’re extending to that particular less-than-reliable company. Check out our ‘How can I tell if someone’s going to pay me on time’ blog for some more tips

It’s often bandied around at the moment, but the word ‘transparency’ is of huge significance when it comes to managing cash-flow, credit ratings and debt within any small business – so make sure you’re armed with all the tools you need and aren’t walking zombie-like into debt! Know your customers but most importantly, know your own business!

You can search over 7 million companies and register free by going to www.credithq.co.uk 

 

 

 

CreditHQ joins Virgin Media Business!

Here at Ormsby Street, we’ve recently launched CreditHQ and are very pleased to now be part of Virgin Media Business – Digital Collection

Virgin Media Business have collated a number of fantastic apps and sites that will be of great value to any small business – ranging from bookkeeping services such as Free Agent to Google Apps for Work.

With CreditHQ, we’re offering businesses the ability to not only check out their financial records (credit scores and payment terms), but the ability to find out valuable insights into who they are about to trade with. With the free Basic subscription service, companies can check out limited financial information and quickly see through our payment indicators, if the company they’ve searched for is a safe ‘bet’ or if both their payment and credit indicators are worrying, a simple upgrade to the Standard subscription offers detailed financial reports including net worth, assets, liabilities, sales, and details of adverse credit events; providing small businesses with invaluable financial information that gives insight into their real cash-flow position and awareness of potential upcoming problems for businesses that they deal with.

Check us out on the Virgin Media Business site…we’ve also included a special offer for anyone accessing through Virgin!

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3 ways to get a better credit score for your small business

Your company’s credit score is important – it will affect how much credit your can get, and it can make the difference between another business choosing you or someone else with whom to do business. So improving your score can only be a good thing!

There are a number of credit reference agencies (e.g. Experian, Equifax, Dun and Bradstreet), who use various sources of information to produce your score in different ways. Credit scoring is about trying to predict the future, from your past financial behaviour.

Although calculated differently, the score will give an indication of whether your credit risk is good, bad or ugly.

Here are three ways to improve your score for your small business…

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Number One – check your score

The first thing to do is check your company’s report – you need to know what your score is, so that you can start to improve it. You also need to know your score, because other people will be checking it to figure out if they want to do business with you – so you should know what information they are seeing about your company.

We can help you with this – you can find your company’s details on our site – CreditHQ – and see your company profile page, which shows your company’s financial information, credit indicator, payment indicator and credit events – so check it – it’s free to sign up!

Credit agencies do make mistakes, so check all your details (address, financial information, credit events, dates etc.).
These details either come from Companies House or the credit reference agency, so dispute anything that you think is incorrect or unfair.

Number Two – pay on time

Time is money – make sure you do things on time! This will massively help your score.

Pay your bills on time – set up reminders, set up automatic emails, set up direct debits or standing orders, so they get paid automatically. Paying even the minimum amount by direct debit for loan repayments or credit card bills will mean that you never miss a payment. You can then top it up each month for the extra amount.

If you are having difficulties, then contact the lender or the payee – changing your payment schedule is preferable to defaulting, and has less impact on your credit score than a county court judgment or decree against you.
Negotiate longer payment terms up front to give yourself extra time to pay.

File your accounts on time – or better still, before the deadline, as it can take extra time for processing. If your accounts tell a good story, then file a full set of accounts, rather than abbreviated accounts.

Number Three – manage your cash flow

Get paid on time – chase the money that is owed to you – set up automatic emails to remind suppliers that invoices are nearly due, and then chase them if they don’t get paid. If you still don’t get paid after the due date, then sending a ‘letter before action’ can make a huge difference – we can help you with letter templates, and debt collect agencies.

Check when a company is likely to pay you – you can sign up for free on our site to find out how long a company is likely to pay you beyond the average payment terms. If the average payment terms are 30 days, many big companies pay up to 100 days late – if you know this already, you can plan for it in your cash flow.

Minimise your debt – if other companies see a lot of debt on your balance sheet then they are less likely to extend credit, as you pose a greater risk to them. Credit agencies will take into account the difference between your current assets and liabilities, and what’s coming in and going out of your business. So maximize your working capital and minimize your debts.

A couple of extra tips…

It’s important to build up as much positive history as possible (which is tough when you’re a new business), but simple things can make a difference, such as if you have a positive credit history with a business credit card, don’t close the account even if you don’t use it anymore.

Every time you apply for a credit product (be it a credit card, contract mobile phone, car insurance), it adds a footprint to your file. If you have too many applications, particularly in a short space of time, it can trigger rejections as it makes it look like you’re in need of credit. Space out applications if you can, and only apply for the things you really need.

Good luck with improving your score, and remember we can help – so please do take a look at our site… and keep reading our blog!

Your rights with overdue invoices

You’ve worked hard to win a new customer. You’ve worked hard to deliver a quality product/service for the customer. But now the customer is making you work hard to get your invoice paid. That can’t be right, can it? It isn’t right, but there’s nothing you can do about it is there? Wrong. There is! You have rights and you shouldn’t be afraid to exercise them in order to get paid. You’re (probably) not running a charity. You have bills to pay and employees who have families to support; so getting your money is really important. And the government know this so they’ve put in place mechanisms in order to support you in getting paid.

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Payment terms It’s always best to have your own payment terms laid out because these will more accurately reflect the needs of your business and you can set these to be whatever you need. 7 days, 30 days, or 100 days. It’s up to you. However, if you haven’t explicitly given terms to your customer then the default is 30 days and it’s within 30 days that they have to pay you.

Charging interest Once the invoice becomes overdue then you are perfectly entitled to charge interest on the amount owing. This would be either your own rate of interest if you’ve included it within your terms, or it could be the statutory rate of interest, which is 8% PLUS the Bank of England base rate for business to business transactions. Don’t be afraid to do this, because it’s your money that they’re stopping you accessing. You could be gaining interest on that yourself if it was in the bank, or you could be investing it in obtaining further work, and you can’t until they pay you.

Statutory demands If all else fails, anyone who is owed money can make a statutory demand and you don’t need a solicitor to help you. Once the demand is received by the company owing the money, they have 21 days to either pay the debt or reach a payment agreement with you. If this isn’t forthcoming then you can start a winding up order against the company. But hopefully all our customers will pay on time and we don’t need to worry about any of this!