Monday, 30 April 2007

What to do when chasing cash

Shropshire companies who allow their customers too much time to pay overdue invoices are risking their credibility, according to a local solicitor

Chris Detheridge, of Martin-Kaye Solicitors, in Telford, said: “Most businesses know that when an invoice is outstanding, you have to chase it in writing – but how many times should you chase it?

“If you send too many reminder letters, giving the client too much time to pay, does it show you’re not serious and you’re prepared to wait a long time for your money?”

Chris said there was no legal minimum or maximum number of letters required by law, but a court would expect companies to try to resolve matters through negotiation first.

“Issuing court proceedings without having given the client a chance to state their case will not look good, and you could be penalised in terms of court costs.”

He said there were key things to consider, including the importance of the customer, the amount they owe, and the profit margin

“If the sum invoiced carries a low margin, you shouldn’t waste any time – one or two quick reminder letters is plenty.

“By the time you have sent an invoice, a statement, reminder phone calls and emails, the costs soon start to mount up – and by the time you get to sending formal reminder letters, the customer may already have had weeks of free credit.

“So the best advice is to send no more than one or two reminders by post before you take action. If you let things drift, your customer will take all the time they can before they pay because they won’t take you seriously.”