From the title of this post you might be thinking we’ve found a great slogan and not much else, a bit like those ads for miracle diets which are all over internet,

Late payment is one of the issues that most worries companies and they are right to worry. In the first quarter of 2012 creditors’ meetings rose to their highest level ever and according to the Spanish National Statistics Institute(INE), aproximately 4% of these overdue amounts will become bad debts. It’s not only private customers who don’t pay, government bodies are the first to delay payment on the times stipulated in The Act on Prevention of Late Payments (see post of 18th November 2010 “Efectos prácticos de la ley de medidas contra la morosidad... otro invento del TBO” “Practical effects of the law of measures against late payments..another TBO comic invention”

Given this reality, business people have two options: one, to drift along with the tide, or the other, to keep an eye on the ebb and flow of the water, and get in or out with minimum danger. Because the good news is that, yes, your late payment level can be reduced, not with magic formulas or huge investments, but with efficient planning and rigorous control which will ensure that, amongst other things, payment periods don’t get the slightest bit delayed and that each person intervening in the process knows exactly what their job is at all times.

In this post we’ll give you a few tips on how to reduce late payment. Only a few, as each company has its own way of doing things, and to be able to set down guidelines for late payment and credit management you have to know well their purchasing and sales cycle, their payment and communications methods, etc.

You have to start with a rigorous control of invoice due dates. The best way to reduce late payment is to act in time. There’s a simple reason for this: the early birds, the first to claim their invoices insistently, have a lot more chance of catching the worm. There comes a moment when business people, overwhelmed by debt and creditor pressure, can no longer listen to reason. Even more, for pure survival, they learn to switch off, even though they know there are companies who will have to close because of their non payment. Before it gets to this, it’s vitally important to have made your claim for invoice payment both insistently and on time. If you don’t have an internal credit management procedure, your payment periods will probably drag on forever, some tasks will get doubled up, others will get left undone, and getting paid will become an impossiblity.

It is also just as important to document the orders and delivery of goods as the payment claims we make to our debtor. When faced with a delinquent payment, the polite telephone call should of course be made, but the next and immediate step must be firm and forceful, reclaim the payment by fax or e-mail, and give the debtor a short period of time to make the payment in. All of this needs control and follow up by one or more people in charge, who should know exactly what their job is at all times and what the next step will be.

For all the procedure explained till now, we should not have let more than one month go by. As mentioned already, if there is any chance of being paid, it will only happen by being insistent with our claim.

If the claim in writing does not work, now is the time to send a registered letter (bureaufax) or put it in the hands of our lawyers, so they can take over while there is still a chance of being paid.

Whatever you decide, don’t forget there is a saying which is exactly right, never more so than at present, "better a bad agreement than a good court case”. If the debtor offers us an installment plan payment option, even reducing the debt, though with sufficient guarantees, accept the offer. Don’t forget that, as should be written in your internal procedure, agreements must be put in writing and should preferably be checked by your lawyer-.

In Estudi Jurídic we draw up credit management procedures adapted to the needs of each company. Calls us and we’ll be happy to inform you without any obligation.


For more information contact marta.lagarda@estudi-juridic.com