In times when profits are being squeezed, cash flow becomes all the more important, especially to small, owner-managed businesses.

But while the supplier-business is trying to get its invoices paid as quickly as possible, the customer is trying to pay as late as possible. It’s a state of tension that leaves many businesses worrying how to make sure invoices are paid promptly but at the same time retaining its customers by keeping them on-side.

“It comes down to making sure that problems don’t arise,” says company commercial law expert Patrick McGrath of Enfield based solicitors, Vanderpump & Sykes . “This means clear, fair and reasonable terms of business and taking care to make sure that the customer knows them. The customer must also be clear about the price. And if the charge or fee is based on time, the supplier must keep customers informed of time spent and reminded of what that means in terms of cash. It’s worth looking at interim billing as well, as it helps both the supplier’s cash flow and avoids a large debt building up for the customer.”

For many businesses, getting bills paid on time is a mixture of carrot and stick, so it is important that the terms of business contain sanctions for late payment by providing for reasonable compensation and interest on the debt.

Other top tips from Patrick include:

· Invoices should be delivered promptly; an invoice delivered a month or more after the work is completed or the goods are supplied can simply cause
irritation.

· The invoice should state when it is due for payment: the customer’s accounts department cannot be expected to be familiar with the supplier’s terms of
business.

· If the invoice is not paid on the due date, an efficient credit control system must kick in and must operate like clockwork. Credit control should not start with
aggressive threats; too much aggression too early may undermine good relations with the customer and be counter-productive. Start with a gentle reminder
and move up through the gears.

· If the invoice remains unpaid the creditor should not take any action without first running a credit control check on the debtor; there is no point in wasting time and money chasing someone who is insolvent.

· If the debtor is solvent but is likely to defend the claim, the creditor should see our litigation solicitor's: Richard Stephens or Jenny Howe at this stage to
discuss the options. These might include court action or mediation.

· If the claim is simple and is unlikely to be defended, a creditor should consider a do-it-yourself approach either in the traditional way through the small claims
courts or online at contacting Vivien Richardson in our debt recovery department.

· And finally, when chasing another business or a public sector body for payment, the creditor has a statutory right to interest and compensation, even if their
terms of business say nothing. Under the Late Payment of Commercial Debts (Interest) Act 1998, interest is payable on debts that are not paid within 30
days of the due date at 8% above the Bank of England base rate. In addition, compensation is payable on a scale from £40 for debts under £100 to £100 for
debts of £10000 or more.

Added Patrick: “Credit control starts with clear, fair and reasonable terms of business that provide effective tools for enforcement. They are the foundation of good customer relations and should be given the priority they deserve. But they also need reviewing on a regular basis, as both business and the law change. An expert can ensure that they are unambiguous and will achieve the desired result.”