A guide to third sector trading - WCVA

It’s an idea, but is it business? A guide to third sector trading
1: Getting
started
2: First steps 3: Business
planning
4: Legal and
governance
5: Funding
and
resourcing
6: Financial
controls
7: Managing
growth
8: Management
and
governance
9: Social
enterprise
10: Sources
of support
• A system for routinely (monthly) issuing statements or repeat
invoices to all customers with unpaid invoices (the timing of this
depends on the type of business – it might be at the end of the
current month or the during or at the end of the second month);
a statement lists all of a customer’s unpaid invoices and the total
sum owed, and is often essential because many commercial
business hold back invoice payments until they receive a
statement.
• A system for producing the total figure of unpaid debts at any
time so this can be included in the monthly balance sheet and
reported to directors.
• Monitoring of unpaid invoices to identify seriously late
payments (8 weeks or more, perhaps) and telephone calls to
politely ask for action.
• Repeat calls to remind persistent late payers you have not
forgotten them.
• Possible arrangements with a debt collecting agency to try to
collect from people who refuse to pay you, or your own system
for taking bad payers to the small claims court.
Chasing late payers: One or two large unpaid bills can make the
difference between viability and failure in a small business. But no
one finds it easy to pursue late payers. Here are a few thoughts to
bear in mind.
• While most of your credit customers will be honourable prompt
payers, it is quite likely that a few will, for reasons of financial
difficulty or even dishonesty, do their best to avoid payment;
you can’t afford to be generous to them.
• Any delay in sending your invoices or statement or making calls
to chase aging debts will be taken as a weakness; their other
more persistent suppliers will be paid first.
• You need to have clear policies so that staff know the steps
involved in pursuing bad debts.
• Be extremely careful to keep accurate records of all your written
and telephone contacts with late payers. You may need the
information if they become bad payers.
• There is a difference between persistence and aggression.
Telephone calls to late payers should be routine, businesslike,
polite; you can be firm but never personal or argumentative.
• If there are queries about whether payments are really due,
investigate them fully and apologise if you have made mistakes.
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