DEBT RECOVERY INSIGHTS

One of the fastest cash-fl ow killers results from unpaid invoices from customers. Even the slightest delay can impact on your bottom line. Longer delays can tip solid businesses over the edge into insolvency.

Prudent businesses use a combination of good credit management backed up by robust systems and e� ective support to get paid promptly. Using specialist services can free you up to focus on what you do best: nurturing trading relationships and securing new business.

As you might expect from a leading law fi rm, we o� er technical expertise in all credit management and debt recovery areas. But more than that, we provide clear, cost-e� ective and commercially-smart solutions to help keep your business fi nancially resilient and running smoothly.

Here we look at the fi ve steps to improving cash fl ow to help you bank the opportunity for greater prosperity.

How well are you tackling the cash fl ow challenge? Cash is king when it comes to the fi nancial management of any business, especially a growing one. Making sure the money you’re owed fl ows into your business is one of the greatest challenges of being commercially successful.

No matter how great your business model is, how many sales you are making or how many investors are interested in backing you, you can’t survive if your company’s cash fl ow is neglected.

1 Manage your payables smartly Top-line sales growth can conceal a lot of problems. Don’t be lulled into complacency. If you see expenses growing faster than sales, examine costs carefully to fi nd places to control them.

For example, take full advantage of creditor payment terms. If a payment is due in 30 days, don’t pay it in 15 days. Use electronic payments on the last day they are due so you remain current with suppliers while retaining use of your funds for as long as possible.

It isn’t always best to focus on the lowest price when choosing suppliers. Sometimes more fl exible payment terms can improve your cash fl ow. Prioritise the bills you pay carefully. Don’t just pay the smallest ones and put o� the rest. Make payroll fi rst and pay crucial suppliers next.

No one can perfectly predict the future and at times you’ll need to manage a cash shortfall. The skill is to prepare cash fl ow projections to be aware early on of the problem. Since it’s easier to borrow when you don’t need it, arranging a credit line with your bank in advance is vital.

Consider using factors. These are fi nancial service businesses that can pay you today for receivables you may not otherwise be able to collect on for weeks or months. They demand a discount, but remove any hassle of collecting and can fund current operations without borrowing.

Five steps to better cash fl ow management

Why keep a track of cash fl ow?An occasional, temporary glitch in cash fl ow is no big deal. All businesses have times when they need to move money around, delay expenses or restructure a deal. However, when weeks turn into months, you could have a serious problem on your hands.

The challenge is the lag between the time you have to pay your suppliers and employees and the time you collect from your customers. The solution is cash fl ow management.

Smart o� erOur aim is to be an extension of your internal credit control team, helping you to tighten up your techniques, processes and approach to chasing debt. We’ll engage with your customers and recover your money, ideally without the need for legal action. But when it’s called for, we’ll pursue all methods of enforcement. We have the capacity and legal capabilities to see matters through to their conclusion, avoiding any costly delays.

2 Look for early warning signs of bad debtors

Be alert to early warning signs that a customer may become a problem. If a key customer normally pays their invoices on time but payments have started to slide, it could be a sign they are experiencing di� culties. Perhaps a customer has changed their name, is using a di� erent bank, or requests a discount or breakdown of the invoice. All may be well and justifi ed; but it might also indicate fi nancial problems.

For growing businesses it is especially important to check the credentials of key customers carefully at the outset and to monitor the relationship as it develops. Being forewarned gives you time to mitigate any risks of bad debt.

Don’t assume that unpaid invoices are normal. You can’t prevent late payments in every situation, but you shouldn’t accept them as a natural part of doing business.

Smart o� erYou need your money paid on time. Using our experience and full raft of legal tools, we can help you achieve it. Success means di� erent things to di� erent clients. So we make it our business to get to know yours – your customer base, how you operate and what’s important. By understanding your unique circumstances, we provide fl exible solutions tailored to your requirements.

3 Be clear in contractsWhen dealing with key customers, some small and medium sized businesses can be reluctant to chase for timely payments. There may be a perception that the trading relationship is too valuable and could be harmed. But these hidden fi nancial costs are eroding your profi t.

Recovering unpaid debts is an essential part of maintaining e� ective credit control and commercial professionalism, so you should be following up with your creditors when debts fall due and without delay.

To prevent bad debt issues escalating, make your late-payment penalties very clear and stay in close touch with late and slow payers. If your customers don’t hear from you the moment a payment is late, you could be at the back of the queue to get paid.

Putting in place clear contractual terms and conditions at the start can help to reduce the risk of bad debts. If you are supplying goods, for example, consider having a ‘retention title clause’ so you retain ownership of the goods until they have fully paid for them. If they fail to pay on time, you have the right to take back the goods and re-sell them, as long as the clause was drafted correctly and incorporated into the contract.

Smart o� erNo matter what the business, we always go back to basics with our clients. We look at your credit management and cash collections processes to see how best we can help. Everything we do is backed by cost transparency, commercial sense and clear reporting. And whatever the concern, we can draw on expertise within our business to provide seamless advice beyond simply debt recovery.

4 Know when to bring in the experts for support

Dealing with late or non-paying customers can quickly become a signifi cant problem for most businesses if su� cient resource is not made available to manage it e� ciently. For many businesses it can be di� cult to know when to call in the experts but specialist advice can help prevent issues going from bad to worse.

Early intervention can help to recover debts more quickly, as older debts are generally more di� cult to collect. It can also help to prevent the situation from spiralling into a more costly and time consuming legal dispute.

So think afresh about using specialist debt recovery services. You may have thought services were una� ordable; in fact most specialist fi rms operate on a fi xed-fee basis for legal enforcement, in line with the costs that the courts allow them to recover.

When choosing a debt recovery specialist, make sure they have the breadth of capabilities to see the matter through to its conclusion. Some debt recovery agencies are unable to issue county court proceedings, or deal with contentious issues, and this can lead to unnecessary delays and costs. By using a fi rm of solicitors, you have the experience on hand to deal with any issue which may crop up and your reputation is protected.

Smart o� erYou need the cost certainty of a cost-conscious, transparent debt recovery service. There are no hidden costs or surprises when dealing with us. We o� er a full pre-legal collection service, with pricing agreed from the outset. As skilled negotiators, we will try to recover your money without recourse to enforcement actions. But where needed, we can handle disputed or defended claims, plus any complex, high value or niche matters – all agreed through tailor-made best fee or fi xed cost arrangements with you.

5 Don’t be passive – or cut corners It’s important to establish the right policies and procedures from the start and make sure they are always followed.

Never be tempted to cut corners when chasing payment. Failing to follow debt management protocols can make it harder to recover bad debt through the courts in the long run.

Having access to good quality advice can also help you to decide whether a claim is worth doggedly pursuing if it has little chance of winning or recovering its full value.

If you are doing business overseas, it can obviously be more di� cult to recover assets. Using the local courts and enforcement measures can take time and systems may lack the transparency of their UK equivalents. Minimise costly delays by obtaining the right information about the customer from the start, such as knowing exactly where any factories and warehouses are located.

Any fi rm you engage will be acting in your voice, whether or not they ‘white label’ their services when approaching your customers. They are an extension of your business so make sure you work with a reputable company who will protect yours.

Smart o� erOur clients trust us to collect their money – but not at the expense of their reputation. Prompt payments are valuable but your hard-won goodwill and reputation is priceless. Through our responsive and responsible service, we protect both to your advantage. We’ll always give you sound commercial advice to nurture the long term relationships that matter, as well as full compliance with regulations and protocols.

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@SHMALaw

Shakespeare Martineau

03300 240 333

Shakespeare Martineau is a leading law fi rm that combines creativity, commerciality and clarity. We pride ourselves on protecting and growing

our clients’ businesses through pragmatic advice and sector expertise. Our approach goes beyond legal solutions; clients instruct us to advise on

what’s possible, what’s prudent, and what’s around the corner.

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We can help you solve the challenge of cash fl owOur award-winning debt recovery team can enhance all aspects of your credit management and cash collection performance by delivering a service local to you.

As heavyweights in our fi eld, we have broad sector experience including fi nance, recruitment, housing, manufacturing, hospitality, freight and energy. When combined with our expert connections and transferable skills, we can quickly get up to speed with any business sector in which you operate.

Every business and its processes are di� erent. We take full account of this to provide tailored services to help you swiftly recover outstanding payments with the minimum of fuss.

Get in touch to fi nd out more and we’ll arrange to meet at a time and place that works for you.

Alan HamblettPartner

alan.hamblett@shma.co.uk 01789 416 475

Jayne GardnerPartner

jayne.gardner@shma.co.uk01789 416 440