Reducing bad debts is imperative for positive cash flow in a business. A strong personal relationship with its customers is a powerful asset to any business, and is certainly an area where Head & Griffiths can make up some real ground on its larger corporate competitors.
However, this cosy rapport should not automatically translate to fragmented payment terms and bad debts. Owain and Dominic need to have faith in the value of their product and understand that their customers expect to pay, and, in fact, are generally very happy to. They often just need a little push.
Procedurally, Owain and Dominic should consider implementing the following as a matter of course:-
- Set out payment terms on invoices/order receipts;
- Request a balancing payment when goods are collected (or perhaps prior to dispatch);
- Obtain comprehensive customer details (just in case legal action has to be taken);
- If necessary, verify a customer’s identity.
Owain and Dominic have done well to spot the flaw in their politeness and now need to make sure that, moving forward, they, through a carefully structured payment policy, are far more direct in raising the issue.
