It’s Halloween next Monday but my daughter’s pumpkin has already gone mouldy. And it’s got me thinking about my worst nightmares.

Right now, mine is another Budget changing all the tax rates for what seems like the 100th time this year when I’ve only just learnt last week’s new ones. However, at least our 3rd Prime Minister of the past couple of months has delayed that nightmare from Halloween into November for me, so I can sleep easy for a little bit.

But, for most business owners, one of the biggest nightmares is bad debts. Doing the work and not getting paid!

So, what can you do to avoid bad debt? Well, here a few of my top tips.

  1. Check the credit rating of any new customer before doing any work. That’ll at least give you a hint whether they’re likely to pay.
  2. Set clear terms and conditions, and have a contractual agreement with every customer. Getting things clear upfront can save a lot of hassle later.
  3. Invoice promptly and make sure you send it to the correct contact details at your customer.
  4. If possible, use direct debit to collect all payments. When you take on a new customer, make them set up the DD as part of your onboarding process. You can then draw down every payment in the future. It’s not perfect and does have a small cost, but it puts you in control.
  5. Make sure the payment terms are clear on every invoice. And, once the payment date is approaching, send a reminder a few days beforehand. And then, if it passes, chase again. And don’t feel embarrassed about it. I think it’s easy sometimes to feel embarrassed about chasing money. But if you’ve done the work, you deserve to get paid. After all, would you treat your suppliers in that way?

And, if you followed all those steps and you’re still not getting paid, get an expert in to help – call a solicitor or a debt recovery service. Often just a letter from one of those will suddenly make your debt get paid.

So those are some tips to avoid bad debts, which are the nightmare of every business owner.

And have a great Halloween next week!
Jon