Business debt is predicted to be an even bigger problem as a result of the Covid-19 pandemic and suppliers may be less flexible on payment terms and trade credit.
Debtors are more likely than ever to orchestrate reasons not to pay and claim they have a right of set off.
Payment terms need to be clearly set out in the contractual documentation. Make sure that your payment terms are incorporated into the contract between you and your customer, including any provisions for contractual interest on late payments. Putting payment terms on your invoice is too late, as the contract has already been made. To secure quick payment you may also want to include terms in your contract excluding or restricting your customer’s right to set off any alleged cross claims. Such terms must be fair to be enforceable.
Think about whether you want to include a dispute resolution clause in your contracts. In some situations, you may find a pre-agreed dispute resolution mechanism useful. However, in other situations where you want to take action quickly to recover a debt you may find it a hindrance.
Look out for customers who are regularly late making payments and who are continually providing excuses. Be particularly wary of customers who raise problems with the goods or services supplied in response to a demand for payment. Diarise the due date for payment, chase immediately payment is not made on time, keep a paper trail and document everything.