Food Law Blog
Opinions and insights from Roythornes' Food and Drink team
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Today’s tight economic situation means cash and debt management can make a real impact on the financial stability of a food business.
It only takes a few bad accounts on your books to make a real impact. How many times have we heard ‘cash flow is king’, and then gone on to let a customer have a little more time to pay because they are ‘a nice bunch’?
Lengthening credit lines and ‘letting people off’ is the start of a slippery slope. Like it or not, you need to be chasing your cash, because it won’t come running to you.
Our advice would always be to make your payment terms crystal clear at the outset in your terms of business and on your invoices. You should also consider, making it easy for your customer to pay by offering several options including credit card, cheque and BACS transfer. At the same time, consider incentivising early payment as the carrot is often better than the stick.
A recurring theme with food business debts is the realisation that the company does not know who they are trading with. They may have been supplying and invoicing ‘Smiths Sweet Shop’ for a number of years, only to find out when they decide to pursue them for an unpaid bill that the company running the shop is called something totally different. If your invoices have been made out to ‘Smiths Sweet Shop’ and the business running the shop is ‘Smiths Sweets Holdings Ltd, it raises all sorts of complications. A simple credit check when you open the account would solve most of these issues.
If you continue to have problems securing payment then it will help if you have a clear procedure for chasing bad debts and that you are not afraid to take action.
If a polite reminder doesn't work then you may need to consult a Solicitor and seek professional assistance. You would be amazed how often a call or a letter from a Solicitor results in payment materialising much more promptly.