Are you providing your customers with a free credit service? When customers pay their bills late, the money has to come from somewhere, and it is often provided through a Business Loan or overdraft, to maintain your cash flow. Now this money can cost as much as 1% per month, or even more, just for the privilege of waiting for your money. Sometimes the money never comes in - and all this cash comes directly out of your bottom line.

A recent survey has shown that almost half of all small business do not check the credit status of their customers, in fact they automatically offer trade credit to new customers, exposing themselves to the risk of late payments and bad debts. So how can you reduce this risk, and collect the money owed to you on time? The Better Payment Practice Group recommends that companies check a new customer's creditworthiness before trading with them, and then closely monitor them throughout the business relationship to ensure payment problems do not develop.

You also need to have clear Terms and Conditions of sale, including your required terms of payment, together with any penalties you may impose for late payment and actions you will take in case of default. Include a copy with each invoice, and with a confirmation of acceptance of order. You should also monitor payments from existing customers, to confirm that they have a good record for payment on time, and investigate any that start increasing the time taken to pay your invoices.

If you would like to know more about managing trade credit, or reducing the delays in getting paid, check out www.payontime.co.uk, or contact us by reply to this E-Mail.

Bill Jones
POSTILLION Business Management Support
Tel: 01494 451239
Independent Advice and Support
Executive Associate, Institute for Independent Business