At this current time of economic downturn, it is more important than ever that organisations manage their businesses to maintain a healthy cash flow by ensuring timely collection of their business debts, otherwise their futures could be threatened.

Late payment can cause serious damage to a business' cash flow, increase its borrowing and reduce its profits so much so that an otherwise successful business with a healthy order book could end up facing insolvency. In the current economic climate there is no guarantee that your bank will be there for you to assist with your overdraft facility or additional borrowing to over come cash flow.

What should businesses be doing?

• Strike while the iron's hot - payment on an invoice can vary from immediately to 30 days of it being received. Statistics show that the longer the delay in chasing a debt, the more difficult it is to collect, so always follow up straight away rather than waiting months, or even years

• Ensure your business has an efficient credit control system to run credit checks on clients, send invoices and reminders and to assist in identifying late payments early

• Know your clients. Have a good understanding of each business that you work with, build up relationships and communicate with them regularly

• Remember that you are legally entitled to claim late payment interest and compensation under legislation - this will contribute to costs you have incurred in chasing outstanding monies

• Ensure that your terms of business are protecting you - they may entitle you to ask your customers for a non refundable deposit, payment upon delivery, stage payments, interest and administration costs for late payment

• Train your staff so that they use and assert your terms of business to make them work for you. In particular, know the payment terms and have systems to ensure these are adhered to

• Make sure that you and your staff keep good records of all activities in relation to your customers

• Don't act as your customers "bankers" at a cost to your business

If you are owed money, it can be cheaper and more effective to outsource your debt recovery work. A letter or telephone call from a solicitor shows that you are being serious about collecting what is due to you. Communication from a legal representative results in a quicker recovery of clients' money. Also, by using solicitors or debt agencies, you remove the need to make the direct personal contact in chasing the debt, enabling you to continue to maintain your relations with your customers.

By allowing somebody else to focus on the debt recovery for your business, you save time which can be spent in managing other important business tasks. So, act now and don't let your business suffer.

For more information visit www.lemon-co.co.uk [1]