Posted: 31/05/2018

As a lot of directors will appreciate, one of the most important aspects to business success is keeping cashflow under tight control with the use of effective credit control. There are a number of practical steps that a business can take to avoid bad debt and reduce the risk of invoices being paid late or worse still, not at all. I outline below my suggested top tips for successful credit control and debt recovery, which can assist in keeping the money rolling in…


1.Effective credit control


Practising good credit management can stop things from getting to the point of having to take legal action or put pressure on your customers/clients. You should put in place a system to ensure you know when invoices are due and when payment becomes overdue. Credit control steps should be taken in an organised way. It is easier to manage if you have a procedure set to timescales and will ensure invoices are continually chased. Telephone contact is important and a very effective form of credit control. Ensure you are speaking with the correct person and that they are able to authorise the payment of your invoice.


Further preventative measures include:


  • Credit checking all new customers;
  • Imposing stricter terms and conditions on customers who have delayed payment in the past;
  • Setting credit limits according to the level of risk and stick to it;
  • Providing a financial incentive to paying ahead of time; and
  • Discussing terms and conditions at the earliest opportunity and making sure your customer/client signs them before purchase.


You can also use a stop list for customers/clients you do not want to give more credit to. Update your stop list regularly and do not supply any more goods/services to customers/clients on the list until they have paid their accounts up to date. Inform late payers that they are 'on stop', encouraging them to pay up.


2. Know your customer/client


It is important to know who your customer/client is, as too often when solicitors are asked to chase debts, it is apparent that the identity of the entity, who the debt is being chased against, is not known, no full name, no address, uncertainty as to whereabouts, etc. To avoid this and increase your chances of successfully recovering the debt, it is important to verify your customer’s identity, trading status and their ability to pay from the outset. You may want to:


  • Always take full details e.g. address and land line telephone numbers;
  • Collect identification documents and conduct a company search at Companies House in the case of customers who are limited companies;
  • Run credit checks and/or obtain trade or bank references before contracting with them;
  • Establish who will be your contact and who will be responsible for payment of your invoices; and
  • Ensure that the entity you are contracted with is the one placing the orders. Be vigilant that a subsidiary or sister company does not try to place orders.


Business debts are different from personal debts and they are quite separate unless there are personal guarantees in place.


3. The foreign company


It is harder and more expensive to recover debts where the debtor is based abroad, so consider taking additional security first. You should be aware that as Scotland and Northern Ireland have their own legal and Court systems, they are considered foreign jurisdictions by the English Courts. The additional security you may want to consider are as follows:


  • Obtain personal guarantees or other security;
  • Ask for a deposit/payment in advance; and
  • Consider obtaining insurance to protect against non-payment.

4. Check and provide your terms & conditions


Good up-to-date terms and conditions are vital to offer you protection from unpaid invoices and they should be kept under regular review. They also limit any liability you may face following the business transaction and provide you with security.


The customer/client should be provided with the terms & conditions most importantly at the start of any agreement. It is important to also obtain their signature where possible. Your terms should include the consequences of late payment and the penalties associated with a breach of the terms and conditions (such as interest). These consequences and penalties can be used to apply pressure and obtain payment from the debtor.


Terms and conditions are the basis on which you do business with your customers/clients so it is very important to get them right and stick to them. It is important to also ensure they are referred to in an order confirmation or other contract document.


5. Ensure your invoices are timely and accurate


Always invoice quickly and efficiently. The sooner you invoice, the sooner you get paid. Your invoices should contain the correct company name, reference number, date and a clear breakdown of which goods/services the invoice relates to. It should also include details of how to pay and refer to your terms and conditions. You should always make sure the invoice details are accurate before you consider taking further action if a debtor refuses to pay.


6. Notice the Warning Signs


Excuses such as “cheque is in the post”, “missed the cheque run” and “can you please make the invoice out to another company” are very common and should raise alarm bells, especially if this is a regular occurrence. You should also watch out for multiple companies with similar names and directors who have been involved in other failed companies. The general rule is if it sounds too good to be true – it usually is!


7. Keep accurate records of correspondence


Obtain copies of all the relevant paperwork (invoices, written contracts, etc) available. This documentation will be required to evidence your claim. All correspondence, whether by letter, phone or e-mail should be recorded and make sure you keep copies of all correspondence passing between you and the debtor. This will allow you to make decisions on how to proceed with the matter and may also assist with eradicating any excuses or queries your customer/client raises. Also this correspondence can be passed to your solicitor who will need this information to successfully recover your debt. Clear information will help when drafting court documents such as the Particulars of Claim and will also help with negotiations.


8. Be pragmatic


Whilst you want to recover the full amount owed to you, if you think that the debtor cannot afford to pay the amount owed, it is worth considering whether you would be willing to accept a lesser sum in settlement of the debt or whether you would be willing to agree to an instalment plan.


9. Take Legal Action!


No one relishes the thought of having to take legal action against debtors, but the money you are owed is rightfully yours by law. Sometimes patience just is not the answer, especially when your business is put at risk because of the debt. 


I can help you recover debts you may have and at Jarmans Solicitors we tailor our service and our fees to your own specific needs. If you would like advice in regards to any unpaid debt, please feel free to contact me on 01795 425411 or visit 


Rico Dexiades


Civil and Commercial Litigation Solicitor