FSB guidance on credit management

The Feb/Mar 2013 edition of First Voice - the magazine of the FSB - contains an interesting article on credit management. It is largely prompted by the poor payment behaviour of large customers towards their suppliers. Some of which are now asking for suppliers to pay a discount to get paid on time. Hopefully this is something that lobbying and government will be able to change.

The article also contains some useful tips on how to ward against late payment which are largely complimentary to what I've included in the original post. I have taken the liberty to reproduce here as I'm not able to link directly to the article.

  1. Re-visit your trading terms and conditions to ensure they are still fit for purpose and aligned with the type of companies that you do business with.
  2. Do a due diligence test of your trading practices. Look at your recent trading history and assess the risk of entering into other contracts of a similar nature.
  3. Carry out a credit check on your customers before doing business with them, get a bank reference, take up trade references, and get their full address.
  4. Consider setting a maximum credit limit for your customers
  5. If the customer is a limited company or a limited liability partnership, consider asking for the directors/partners to give personal guarantees.
  6. Always provide written terms and conditions and make sure these are agreed by the customer before any goods and/or services are provided.
  7. Set out what you're doing, and when payment is due. Simply putting terms and conditions on the back of your invoice will be too little and too late.
  8. When goods and/or services are supplied, ask the customer to sign an acceptance form to minimise the possibility of a dispute arising later.
  9. Ensure the invoice goes on time, to the right person and sets out clearly what you've done, the amount owed and when it is due.
  10. If the customer is late paying, find out why and, if necessary, send a reminder with a timeframe.


To this I'd add to check the website of the company to see whether the values talk about supporting local businesses, social responsibility, ethical standards etc. If you are experiencing systematic behaviour that seems to contradict these statements then one of two things are likely to be the case. Either these values are not filtering down through the organisation or the organisation has a conscious policy of not living by the values they espouse. In both cases the threat of escalation can help to resolve one way or the other. If it is deliberate policy then gently enquiring about the difference between words and actions can help to focus minds. Of course this needs to be done in a sensitive way to maintain and protect the relationship with the customer.


About Jonathan Nicholls

Passionate about improving business performance
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