They are everywhere – deadbeat debtors who refuse to pay their bills.
The best way to beat a deadbeat debtor is to avoid doing business with them at all. That means recognizing dud customers for what they are.
Some of the best deals we have ever done are the deals we’ve declined.
The most important thing you should do to protect your business is to ask questions of all your customers.
Get an idea of how their business is put together.
Ask for trade references.
Request the owner complete a credit application form.
You should, at least, know the answers to the following queries before providing credit:
- How long have they been in business?
- Who are the directors of the company?
- Who is responsible for accounts payable?
- What are the private addresses and home phone numbers of the directors?
You will find it much easier to obtain this information up front when a business wants your products and services – later may be too late.
If something goes wrong you are going to need good quality information so that you can recover the money you are owed.
If this information is refused you have to ask yourself why. Is the company you are dealing with trying to take advantage of you? Is it trying to make you vulnerable?
If a business is not cooperating with you at the front end things could really come unstuck very quickly after you have supplied your goods and services.
The best way to deal with all these issues is to have robust terms and conditions of trade in place and signed off before anything else happens.
It makes you stronger because you have a way to explain how the business will be conducted. In other words, who is responsible for what.
You will have a reference, if a dispute arises and it boils down to “he said, she said” . Instead, you can point to your document and say, “look this is what we both agreed in the terms and conditions”.
It is simply a way to protect yourself and keep your cash flow healthy.
Without strong terms and conditions you are setting yourself up for disaster.
It is also important that each business has terms and conditions which are suited to its needs.
No, two businesses are the same.
One client can have terms and conditions which are 3 pages long, another – in the same industry – may have a 15 page document.
If you need assistance drafting powerful Terms & Conditions let us know and we will refer you to an appropriate professional