Precautionary measures to avoid bad debts
There are a number of precautionary measures you can take:
– make sure new clients and customers provide information about their credit worthiness, including credit references, and a commercial credit check on companies;
– make sure you are clear about the terms of supply of credit;
– investigate the possibility of obtaining a personal guarantee from the directors of a client company;
– follow up debts immediately they are overdue, and consider more stringent terms in the future, e.g. the supply of goods C.O.D. or prepayments before work/supply is begun;
– get supply agreements in writing, so you have proof of agreement to the supply terms;
– check out whether it is feasible to withhold the passing of title in equipment and materials until payment is made;
– avoid later claims of unsatisfactory work by getting a customer to sign an agreement that the work was completed satisfactorily;
– investigate the possibility of progress payments for ongoing contracts or work.
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