Credit Terms

Nearly all businesses are required to offer their customers credit terms, whether the terms offered are 14 days or an eye watering 60 days, there is no guarantee that you will get paid at the end of that period. Banks and Finance Houses can demand personal guarantees and other securities, but most small and medium sized businesses are not able to demand the same terms.

There is still an attitude, particularly with small companies in the UK, that achieving the sale is the most important aspect to business. People celebrate winning orders, but never getting paid for delivery of that order.

“To give credit is a mathematical equation of risk, every step a Company takes to protect their position reduces that risk in their favour.”

On a regular basis a new client is referred to us who has a problem with a debtor customer, who for whatever reason will not pay their invoices. Our first step in this situation is to carry out searches on all information that is available, and unfortunately, in numerous cases we find adverse information concerning the debtor company, which if the client had carried out some very basic searches would have found. There is no doubt the question of credit would simply not have arisen.

This does not mean that the Debt is unrecoverable, but it does reduce the chances of a successful recovery and will incur an unplanned cost of recovery.

Companies are normally set up as either a Limited Company, Sole Trader/Proprietor, or a Partnership, there are huge legal differences in these setups. Most business people are honest, hard working and simply trying to make a living, but there are certain individuals and companies who use the system to use and abuse a supplier’s credit terms.

For instance, a limited Company can have an unlimited number of Directors, but the Company is a legal entity, the entity owes you the money NOT the Directors. Most people are unaware of the following facts.

That you can set up a Limited Company online the same day for as little as £20.00.
Whilst a Director of a Company is required to exercise certain legal protocols, a Director is not required to have any business experience whatsoever.

Most registered Limited Companies have an issued Share Capital of £2 this is the amount that should the Company enter any form of insolvency, that the Directors would be personally liable for.

There is no perfect system which will guarantee that a Company can avoid bad debt, but here at NPD & CO we believe we can provide your Company with some simple low-cost remedies and advice that will severely reduce your exposure to bad debt, and we can act promptly and swiftly in taking action against any of your problem clients.

Should you have a problem with a non-paying debtor, or require some precautionary or emergency advice, do get in touch with our experienced debt handlers on 0208 665 6666 or contact us HERE.