Self help remedies
In addition to carrying out credit checks on potential customers and adhering to a clear credit control procedure, businesses can take a number of other steps to minimise the potential effects of the insolvency of a customer.
Retention of title
A retention of title clause in your terms of trading may enable you to repossess your goods in the event of non-payment by your customer. You must be able to identify your goods, which the customer must not have integrated as part of his own product. For example, a cloth supplier may be able to repossess his unused cloth - but not if it has been made it up into finished garments.
Credit insurance
It may be possible to obtain credit insurance against bad debts, which will enable you to recover a percentage of each unpaid invoice in the event of your customer's insolvency. The availability and extent of cover may be dependent upon the nature of your products or services and the type of customers you trade with.
Guarantees
In some circumstances, you may be able to obtain a personal guarantee from a director of a major customer, or from a parent or other group company.
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