A guide to third sector trading - WCVA

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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. 152
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 • Use threats of ‘further action’ extremely sparingly because you do not have too many options. • One useful stage is to tell very late payers that you will have reluctantly to follow company policy and put their debt ‘in the hands of your solicitors’; this means very little but it can be a final warning before you actually take legal action or you give up on the debt. • You may find the idea of using debt collecting agencies unpalatable, but they can sometimes be helpful if you have a number of outstanding payments. Check out the approach and reputation of any agencies you employ – you don’t want to be associated with heavy-handed methods. − you will have to pay a fee − the process can be time consuming, so it may not be worthwhile pursuing very small sums − even if the judgement is in your favour it does not guarantee that you will be paid what you are owed by wily debtors − more information and forms are available from the HM Courts Service at www.hmcourts-service.gov.uk • Make sure that people who do not pay their bills are known to sales staff – you won’t want to offer them credit again. • There is rarely much point in using a debt collecting agency (and paying a substantial commission on any money recovered) until you have exhausted your internal systems. • It can sometimes be worthwhile exploring the arrangements for pursuing bad debts through the County Court system – commonly referred to as the ‘small claims court’. But bear in mind: − although the Court is relatively free of bureaucracy and you do not need to be represented by a solicitor, it is sometimes advisable to get legal advice 153
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