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Debit Notes. Friend or Foe?
Customer .. read more
The secret to getting paid!
Probably, the question that I am asked most often is, 'what's the secret to getting paid on.. read more
Retention of Title, the difficult one!
ROT! Utter ROT (Retention of Title) and some people look at you blankly. We all know w.. read more
Can't pay? Won't pay?
When it comes to getting paid there are three types of Customer. Those who pay in an a.. read more
Small business being hit for six!
It's really quite sad to note that the majority of calls coming into the office so far.. read more
In the beginning...
Posted: November 17, 2011
'When I first came here, this was all swamp. Everyone said I was daft to build a castle on a swamp, but I built it all the same, just to show them. It sank into the swamp. So I built a second one. That sank into the swamp. So I built a third. That burned down, fell over, then sank into the swamp. But the fourth one stayed up. And that's what you're going to get, Lad, the strongest castle in all of England.'
King of Swamp Castle, Monty Python and the Holy Grail (1974).
Things are only as good as the foundations upon which they are built and Credit Control is no different. Stay with me here as I want to ask a hypothetical question. Imagine that you were selling your car for, say £7,500. (OK, it's your wife's car). A chap comes along, looks it over and says that it is just what he is looking for. He offers you the full price provided that you let him drive it away now and let him send you a cheque in 30 days time. What's your reply? (If it's 'OK' then please e-mail me your contact details without delay!) Obviously, the sane amongst you would politely decline his offer. I doubt that you would let anyone do that, probably not even family.
So, how is it that every day, hundreds and thousands of business do just that? They provide goods and services on credit to strangers without any sort of checks into the people that they are actually dealing with. Cast your eyes over your own Customer base. Is that Customer a sole trader, partnership or limited company? How many Customers do you have with a PO Box number as an address or even a postal accommodation address? Who has goods shipped to addresses that aren't their own, perhaps into a third party logistics company? Who comes by to collect their goods so that you never actually know where they are based? Are you trading with them on your terms and conditions of sale or their terms and conditions of purchase? If you were not to get paid would you know who to take to Court and where any of your goods may be now? Which Customers are helping themselves to extended credit and using you as their Bank? Why is there so much money overdue by more than 30 days? Which oneís going to go bust next? These are only just a few of the questions that you could be asking yourself.
Even if you think that you have done all the checks I'll bet that there are those amongst you who have been the subject of some sort of fraud and, if youíve been lucky to date, be very careful as this type of crime is on the increase. Anyone heard of Intertechnik Limited or Damiani UK Limited? Hindsight, being a wonderful thing, led us to intercept the second company when they started out on their spree in January 2008 and several Clients and friends of ours managed to withdraw their goods or cancel orders before they got caught. Unfortunately other Suppliers got drawn in over the next few months and lost large sums of money.
What about those Customers who have gone bust, owing hundreds of thousands of pounds, and immediately started trading again under a slightly different name using the same assets and Customer base? It may be legal but it's certainly not right, is it?
I could go on and on but I guess you've got the point by now and I don't want to worry you further. Funny old thing credit, itís an integral part of business, you have to give it or Customers go elsewhere.
What do you have to do to reduce these risks? Over the coming months we'll be posting further diary pages going into the processes in more detail, helping you to ensure a firm foundation for your 'castle'. Sure, it may still catch fire but it shouldn't sink into the swamp!
If you have any experiences to share that may help others avoid bad debt then we are happy to hear about them and, if possible, publish them here (discretion and confidentiality assured). E-mail me at: email@example.com