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Donna Goddard

Debt recovery

In 2018 the Insolvency Service recorded that Company insolvencies were at their highest level since 2014, with a slight increase of 0.7% on 2017. Individual insolvencies were also at their highest level since 2011 with an increase of 16.2% on 2017. There was a 19.9% increase on Individual Voluntary Arrangements (“IVAs”) which is the highest level ever recorded. With this in mind, businesses need to focus on tight cash flow across all areas and understand the importance of putting a credit policy in place.  

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Why is a credit policy so important?

On average, 1 in 4 invoices is paid late.  “Cash flow is a reality” – late payment can cause considerable cash flow issues for your business especially when the late payers are large customers. 

We recommend that businesses of all sizes should have a credit policy in place with clear guidelines that set out your terms and conditions. This should include terms of payment of your invoices to keep your cash flow running and to avoid a high volume of aged debt. 

Ten steps to implementing a credit policy

  1. Use Account Credit Application forms to keep details of your customers 
  2. Check or monitor your customer’s credit rating on a regular basis 
  3. Clearly set out your payment terms 
  4. Set up a procedure for non-payment of invoices in line with your payment terms and keep to it. 
  5. Decide what interest will apply on overdue invoice – ie. contractual, statutory or, late payment interest 
  6. Think about incorporating third party fees into your terms and conditions so you are covered if a customers account has to go legal 
  7. Ensure your terms and conditions are up-to-date 
  8. Telephone your customers to ensure that they have received the invoice and that there are no issues to be raised (identifying the issue early will ensure that it is resolved quicker)
  9. Review your aged debt ledgers regularly and customers are chased for prompt payment.  
  10. Consider referring to legal when invoices hit between 45 and 60 days overdue. 

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.


Get in touch

If you have any questions relating to this article or if you have any outstanding debt or interested in reviewing your terms and conditions, please contact Donna Goddard on [email protected]

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