Pic: CA Finance
This week it was reported that AirAsia may not survive the Covid-19 crisis and even Firstgroup admitted after three years of heavy losses it could go under. Most observers believe Firstgroup and possibly AirAsia could be bailed out or nationalised by their Governments but since Flybe was allowed to crash nothing is guaranteed – including their beleaguered suppliers getting paid.
Ian Carrotte of ICSM Credit said too many suppliers of big firms allowed themselves to be sucked into a cycle of supply and late payment with overdue accounts rising month by month.
“The classic case is where accounts departments chase up a string of invoices,” he said, “but strangely only a small number of the invoices are paid while queries are raised on usually the larger amounts. It’s a delaying tactic by the client who is experiencing cash flow problems and uses all the old tricks to delay or not to pay on time.”
ICSM Credit’s members are aware of a string of delaying tactics used over the years but Ian Carrotte said in the present climate the excuses not to pay have increased as companies struggle.
- “The cheque is in the post.” Nobody pays by cheque anymore but incredibly this is an excuse still given. The variation is we posted it ages ago so it must be ‘lost in the post.’
- “The director who signs off payments is on holiday.” Even old school directors have mobile phones on which they can see their emails and messages while sunning themselves in Spain. Don’t buy it.
- “We haven’t received your invoice.” This one is usually given long after the payment date has passed prompting the time consuming process of starting the process all over again.
- “The person who authorised the work has left the company and we have no record of the job.” Handy get of jail free card but it doesn’t wash – you have all the documentation.
- “We can’t pay without a purchase order.” This excuse irritatingly comes well after the payment date has passed and hasn’t been mentioned before.
- “We’ve already paid that invoice.” You have to come up with the paper work to show they haven’t paid – at which point they ask for a duplicate invoice so they can ‘process it.’
- “The amount is wrong.” As always this is given as an excuse long past the due date and after much toing and froing they agree the amount is correct – having bought extra time.
- “That was the old company that went bust.” Strangely apart from a name change the ‘new’ company is in the same premises with the same people doing the same work.
- “There’s nobody in accounts.” Your chasing up phone call is answered by someone in accounts but apparently there is nobody there.
Best practice to avoid hearing these excuses too often:
- Invoice for work promptly and include all details of the work with a breakdown of costs.
- Ensure you have either an email confirming the order, a purchase order and number, or other written documents requesting the work.
- Before working for a new customer make sure they have a copy of your terms and conditions and have preferably signed them off.
- If your payment terms are 30 days then on day 29 phone up and remind them that payment is required tomorrow and make a written note of what the customer says.
- Stay polite and diplomatic at all times and if possible build a friendly relationship with the person who actually pays the invoice.
- Never rant and rave at your customer’s accounts department as they may be under pressure from management to slow payments down and it will not help your cause.
- Review all your customers regularly to see how much time is spent chasing money. Terminate those customers who are timewasters.
- Join ICSM Credit to find out who is not paying their invoices, who may be in danger of insolvency and to use the group’s free legal letters.
About ICSM Credit
ICSM Credit has more than four decades of experience as a credit intelligence group whose members gain inside information about firms in trouble allowing them to avoid bad debts and rogue traders. To join costs less than a tank of fuel – while at the moment there’s a special free temporary membership offer during the Covid-19 crisis which gives access to free legal letters. ICSM also has an effective debt collecting service which has a global reach – ask for details from Paul.
For details about ICSM Credit call 0844 854 1850 or visit the website icsmcredit.com or email Ian at Ian.email@example.com on how to subscribe and to join the UK’s credit intelligence network to avoid bad debts and late payers. Follow ICSM Credit on FaceBook, Twitter and YouTube and Ian Carrotte on LinkedIn.
To keep up to date subscribe to the FREE ICSM Credit Newsletter to hear all the latest insolvency news and to see who has gone out of business click on the orange panel on the top left of the home page of the website icsmcredit.com or send an email to Ian.firstname.lastname@example.org
For details for the work of the journalist Harry Mottram visit harrymottram.co.uk