Everyone is going through tough times at the moment and at times like this it makes sense to make sure:
- You keep any customers you do have;
- Cut your costs down; and
- Make sure you get paid on time.
You can help yourself do this by:
- Reviewing your standard terms and conditions of business (and if you don’t have any, issue them quick).
- Review any standard terms and conditions issued to you by your suppliers.
You’re looking at them to see:
- Are you tied in to a contract for a fixed period of time?
- If you have an important customer could you tie them into a fixed term contract so you could guarantee minimum revenues for a period of time?
- Can you afford all of the contracts you’re subject to? Can you get out of them? Sometimes the cost of terminating a contract can still be worth doing – it may be cheaper than continuing.
- Can prices be raised or are they contractually fixed?
- What are the payment terms? Would you be able to negotiate payment up front?
- Have you reserved ownership of goods until payment in full is made? If you do not do this, ownership passes on delivery even though payment has not been made. You need to ensure the written terms apply to your customers and are compliant with case law on retention of title. Have any of your suppliers imposed retention of title clauses on you? If they have are you still able to deal with their goods as you need to?
- Can contracts be transferred? Some customers have been assigning contracts to new subsidiaries with poor credit records so when you come to recover payment you’re unable to do so.
Once you’ve reviewed your terms and you’re happy with them you need to make sure:
- You don’t start work until a written agreement is in place.
- Don’t be tempted to fix prices or rig bids with your competitors – it’s illegal and could lead to a fine and/or jail.
- Check the credit worthiness of your suppliers and customers and keep an eye on the progress of your key suppliers and customers. If things start to go downhill you could consider asking for payment up front in cash or by irrevocable letter of credit payable at sight or for a Director or parent company guarantee. These will need to be checked by a lawyer to ensure they’re legally binding.
- Be pro-active and ensure you enforce your rights. Don’t let late payments build up. Often the creditor who proceeds first recovers all their money.
Call Cathy Cook on 01924 387110 for further advice or to draw up any contract terms you need and if you are having difficulty recovering payment then Call Lynn Durham on 01924 387110 for advice.
Related Blog Articles