Safeguarding your cash flow and making your business Brexit-proof

Local and national businesses are starting to feel the effects of Brexit, with news of local businesses even closing due to the exchange rate of the pound to the euro. It has become more important than ever to make sure your business’ cash flow is robust enough to deal with the uncertainty currently facing UK plc.

Cash flow is the life blood of any business – so getting effective credit control and debt collection in place is key if the company is to prosper and grow.

A critical point to appreciate is that credit control starts from before a sale is agreed. This means that your sales team must obtain the right basic information from a prospective customer, with the most important piece being who your customer actually is, e.g. a limited company, a partnership or an individual. Without this information, seeking to recover payment will be extremely difficult and will only lead to extra costs being incurred to establish who has formal responsibility for the amount owed.

Items to include in your contracts for payment collection

To assist in the collection process, you should consider including the following items in your contracts and the terms and conditions of sale that are used by your salesforce:

• Strict payment terms
• As much information as possible regarding your customer (i.e. phone number, address, email address) – if you need to attempt to recover the outstanding invoice then knowledge is power. Make sure that all sales people are fully briefed as to what is expected of them in obtaining information from the customer
• The addition of interest to invoices which have been paid late
• The ability to recover legal costs.

How to deal with unpaid invoices

Importantly, once a product has been sold or a service provided you should raise an invoice without delay. Should the invoice remain unpaid after the payment term then you need to consider implementing a strict procedure, such as:

1. Send an email or text reminder a few days before the invoice is due for payment
2. The day after payment is due you should note at this point whether you are claiming interest or not
3. 4-5 days after point 2, make a phone call to the customer to establish if there is any difficulty with payment of the invoice (be it a dispute or an inability to pay at once).
4. 7 days thereafter send a formal letter attaching a copy of the invoice
5. 4-5 days thereafter attempt a second phone call to the customer
6. 7 days thereafter send a formal letter of demand
7. After a further 7 days, any outstanding accounts can be referred to Brachers for collection

This is a guide to the general principles that it is sensible to follow. Of course, there may be individual customer where you want to play things differently, according to the relationship you have with them or knowledge of any special circumstances.

At Brachers, we can provide you with a variety of services to assist. This can range from general advice on credit control policy, to drafting specific documents such as contracts and terms and conditions, to undertaking active credit control on your behalf. Should the need arise, we can also help with formal debt recovery procedures through the court process.

This content is correct at time of publication