Blood from a stone

Do some homework
Julian Roberts, director of PwC’s receivables management group, urges businesses with recurring credit problems to ‘get back to basics’.
‘At the most basic level, you need to have people who are actively involved in chasing debt, rather than just doing it on Saturday morning as a number of business owners do.
‘It all comes down, at a very early stage, to knowing your customers,’ he believes. ‘It can be useful before you do business to do some "sounding out" about a potential customer’s credit-worthiness – even if it’s just "He’s a good chap" from someone whose opinion you trust. And your sales team is a very important part of that – they go into the offices of your clients and can see if the company is well organised.’
Aside from that, there are numerous agencies that provide reports on how quickly potential customers pay their bills, and, if they’re listed, you can find out for free on Creditscorer.com.

Get a good financial controller
It’s vital to have a good credit controller, stresses Roberts. ‘They should have monthly cash collection and overdue-debt targets; better still, they should be incentivised to meet them.’
Or go further, counters Wilmshurst, outlining the most important change he made at Nationwide – incentivise management to take responsibility. ‘We linked debt to managers’ rewards. If there was a £1,000 debt that passed 90 days that would cost the manager £100. Suddenly all the managers found a way to get their money. Management of credit needs to be part of managers’ jobs, not just something they blame on the finance department.’
Warming to his back-to-basics theme, PwC’s Roberts mentions more principles that credit departments should adhere to: getting the bill out at least the day after the delivery has gone out; checking the ledger every day and not waiting until invoices are overdue before chasing them; and perhaps putting credit limits in place for each customer. But avoid standard collection letters: ‘They’re thought of as a bit of a joke and are generally useless,’ he warns.

The right deal
When signing deals, it is imperative that sales staff ensure contracts contain your terms and conditions, or at least decide whose terms and conditions apply and whose jurisdiction it is if you’re dealing across international borders. Jane Dunlop, partner and debt recovery specialist at law firm Clarke Wilmott, has seen businesses make purchasing deals verbally or on the back of the proverbial fag packet. She stresses that ‘if a contract’s straightforward and there are terms and conditions that have been adhered to, the money has to be paid.’
Dunlop observes that, of the many County Court actions in which she’s been involved, ‘there are invariably cases where the company hasn’t chased the money, the work hasn’t been done, or someone else has chased them harder. Sometimes the invoice and the chasing haven’t been directed to the right person. I’ve even had to send bailiffs to Tesco’s before – clearly a company that can pay – but the supplier wasn’t getting through to the right person.’

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