Finding, getting and keeping customers is the challenge every business faces. Very few are lucky enough to have new prospects queuing at the door! But can you be sure that the customer, after all your hard work, will pay? Once the tender is in and the bid has been won, will all the payments be made on time and as invoiced? What can you do to get a client to pay an invoice? How can you get customers to pay on time, and if they do not, how should you dispute late payments?
After a few years of trading you may feel that the relationship is good and you will be able to trust your customer so these problems will not affect you. You may believe that because the organisation is very large it will surely pay your invoice in order to protect its reputation. Perhaps the buyer has assured you that a budget is in place and there is no danger of non-payment. Your sales team may have checked the track record of the customer elsewhere and be confident that the customer is robust financially.
These indicators are all important, of course, but don’t be surprised if payment delays do occur. A well-designed sales process should be tracking and monitoring customer performance and standing in the market, but that can be difficult when time is short and there is limited information available.
Or you might be selling to many small businesses and run out of time to check their credit score, especially at the month end when the pressure is on to meet sales targets. So sooner or later you are likely to have a client who refuses to pay an invoice, or delays the payment.
That’s where credit management discipline is vital. Whether you have a dedicated team, rely on sales or do it yourself, putting in place the tools and processes to track customer credit will build confidence that today’s sales will bring profits tomorrow. Confidence that can be shared with your bank manager, finance company and investors.
The most powerful tool in the credit management kit is trade credit insurance. The ‘back stop’ that will ensure you receive payment. This cover is designed for those times when you’re let down by the most reliable buyer, or the organisation with the best reputation or your longest standing customer.
Check recent news online about your customer’s business
Arrange for the finance or credit team to visit the customer
Look back for evidence of slow or late payments in past years
Check with finance colleagues what impact a failed payment would have
Arrange cover for single contracts that seem to be higher risk or are very high value
Don't forget: You have responsibilities as well as rights as there are legal conditions for invoicing and customer payment. For example, you must provide an invoice with the correct information as explained here.
The risk of non-payment is always present even when you believe your customers are trustworthy businesses. Trade credit insurance covers you for commercial and political risks that might prevent payment of monies owed to you. With our trade credit insurance you can avoid customer insolvency and mitigate non-payment risks. We monitor the financial health of your customers and grade them to provide you with a simple scoring system. You can then set trading limits to control the size and frequency of orders you will accept, whether from new or existing customers. We monitor the grades constantly and inform you of grade changes based on the financial challenges your customers may be facing. You can then adjust your trading limits to manage the credit risk. We also offer debt collection services to support your own processes and optimise payment rates. Your banking and commercial relationships will improve when you have trade credit insurance.