How IT contractors can keep bad debt at bay - Part 1

Taking a few precautionary actions and getting your terms and conditions in order at the outset can give any business a leg up to avoiding late payment, writes Charles Wilson, managing director of Lovetts, a law firm with more than 30 years’ experience in debt recovery. It can also help later on by allowing contractors to more easily manage those overdue payments that will inevitably crop up along the way. What steps you should take AFTER your payment is due will follow on CUK, but:

BEFORE payment is due:

• Carry out credit checks before taking on new customers
• Monitor the credit scores of existing customers
• Put in place from the outset clear Terms and Conditions. These should include details of a set collection strategy
• Ensure your Ts & Cs allow you to charge overdue interest and compensation for late payment. In addition, consider including a clause so that you can claim immediate payment on contractor invoices not yet due in the event of financial trouble
• Ensure current and new customers actually understand the terms
• Make sure your Ts & Cs apply to the contract by sending or referring to them just before the contract is signed and sealed. Print them on the back of all quotations with a clear message on the front that they will apply to any order resulting
• Consider credit insurance. While this is now more expensive than it has been in the past, it could be the lifeline which saves your firm in the event that you do not receive a larger payment in time.