We are used to being bombarded with products for our businesses, but the catch is they always seem to come with a significant cost involved. Here’s some great advice that is free. It can be implemented almost immediately and will provide tangible benefits within weeks.

Printers generally do business with other companies. My tip is to amend your trading terms so that these companies have to foot the bill if their account goes into default and the matter has to be referred to a collection agency or lawyer.

I recommend inserting a provision along the following lines:

“In the event of the customer being in default of his obligation to pay and the overdue account is then referred to a debt collection agency and/or law firm for collection, the commission payable and legal costs on an indemnity basis shall be added to the amount outstanding and form part of the debt and in the event where the collection agency charges commission on a contingency basis the commission which would be charged if it achieved 100% recovery shall be added to the debt and the total shall be treated as a liquidated sum.”

Ensure your customers understand that this clause forms part of their contract with you. A good place to include it is in your quotes and written confirmation of orders.

It is also a good idea to incorporate this (and other trading terms) on your website and include wording in your quote and order confirmations to read something like:

“This order is subject to our trading terms which are located on our website. As our terms may change from time to time, please check the terms on the website prior to placing an order as future orders will be subject to the terms existing on the website at the time the order is placed.”

When sending out your invoice and first statement, remind customers about the clause and that they will have to pay any collection costs if their account is not paid. This will speed collections because there is a real penalty if the customer does not pay.

If it looks like a customer isn’t going to pay on time, a telephone call will often do the trick. Say something like this:

“If the account is not paid by 5pm on Friday, it will be referred to our collection agency, and in that event, pursuant to our terms, you will be liable for all collection costs incurred by us.”

Businesses often make the mistake of hanging on to outstanding accounts for too long in order to avoid collection costs. This is a big mistake because it sends the message to your customers that you are not serious about collecting money.

Incorporating my clause into your trading terms will improve your cashflow and reduce the risk of bad debts. It has no downside. In most cases, it will cost you nothing, because the collection costs will be paid by the defaulting customer.

Roger Mendelson is chief executive of Prushka Fast Debt Recovery

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