First you should do is get to know your customer. You should do this before you take on a new customer and before you give them any credit. The bare minimum of what you should know is:
- the exact name of the customer and the trading address (consider using Companies House Webcheck service)
- their type of business structure, e.g. are they a sole trader, a partnership or a limited company?
- names and personal addresses of the proprietors’ if their structure is unincorporated. Consider verifying letter headed paper to support this information
- contact other suppliers to obtain references
- their credit rating
Before you provide goods or services to any customer make sure you address the following:
- discuss and agree payment terms with the customer before accepting the order
- agree the terms in writing
- review any documentation from the customer where they try to change the agreed payment terms
- negotiate and agree payment terms with suppliers before accepting the order
- if there is a gap between customer and supplier payment terms, consider whether finance is available to bridge the payment gap. This will require an understanding of your working capital management
- produce a cash flow forecast covering all expected income and expenses
- have a standard policy in place to ensure that payment terms cannot be altered without appropriate authorisation
- ensure that you have the right to apply late payment and interest charges on invoices
After you have provided goods or services to a customer ensure that you:
- raise invoices promptly
- raise invoices accurately to ensure all items are included at the quoted prices
- include a reference number for the order and then quote this if any dispute arises
- have everything the customer requires on the invoice
- have a process for chasing invoices
- have a process for dealing with disputes
- keep a log of disputes to ascertain whether similar disputes or customers occur
- ensure that your invoices are fully compliant with HMRC for VAT purposes
If you are starting, or have started a business in Chislehurst, Bromley, Kent and London areas, please contact us at Adiva Accountants in Chislehurst for more detailed advice.