There’s little doubt that times are tight. There’s equally little doubt that some businesses will be adversely affected.

However, it is possible to ride out an economic downturn by getting your business fit to fight for survival advise London accountants Carter Backer Winter (CBW).

There are many ways to trim the fat and fine tune a business but managing working capital is always crucial.  This is why it’s so important to ensure good credit control.

For effective credit control London accountants Carter Backer Winter (CBW) strongly recommend a two pronged approach:

•    Reduce the risk of incurring any bad debts

•    Recognise the early warning signs, and act on them

1. Reduce the risk of incurring bad debts

Know your customers Effective credit control starts when the customer first walks through the door but must continue for their lifetime. Therefore, always conduct a thorough initial investigation and also develop a culture of being aware of changes within your customers’ businesses.

Tight terms of trade Your terms of trade need to be clear, tight and understood. Consider including standing order requirements, a Reservation of Title (“ROT”) clause, goods on consignment and cash on delivery options. Guarantees are also an option but remember that they are only as good as the guarantor.

•   Make it known that you’re serious Customers should know their accounts are being properly controlled. This way they know you mean business.

•   Consider insurance Although potentially expensive, there is a place for credit insurance. 

•   Be vigilant for change Whoever manages your credit facility needs to identify changes within the customers’ payment profiles as they happen.

•   Take action! The sooner you act, the more successful you are likely to be in having all of your invoices paid.

2. Recognise the early warning signs and act

Bad debts are one of the key reasons why businesses fail so it pays to heed the classic warning signs that a customer is under financial stress.

•   The top 10 early warning signs of a business under stress

•   Delays in settling accounts

•   Exceeding pre-set credit limits

•   Round sum or part payments

•   Post dated cheques

•   Bounced cheques

•   Cash purchases

•   Sudden switch to factoring

•   Distress sales

•   Unusual order sizes

•   Non payment

It’s equally important to take action as soon as you see the signs of stress in any of your debtors. 

If action is required, your options will include: removing goods supplied under ROT, ceasing supply and starting debt recovery procedures.

Need further advice? Got a question? Then visit London accountants Carter Backer Winter (CBW) website