No one can have escaped the recent headlines, “Blockbuster announces closure of 129 stores”, “Jessops to close with loss of 1,370 jobs”, and “Hundreds more UK shops close, BRC (British Retail Consortium) says”. Grim reading, particularly if you’re a supplier. After all, more often than not, you will be an unsecured creditor with little recourse if your customer goes bust.
Here are our 5 top tips for suppliers and not just for those supplying to retail.
- Credit Checks
Don’t extend credit to customers unless you have a satisfactory credit report on them. Provide a ‘Credit Application Form’ as part of your business process and ensure each potential new customer completes it. Take time to check references to determine if your customer is creditworthy. Remember, credit checks should be ongoing, not a “one-off” at the beginning.
- Retain Ownership
Include a provision in your sales terms which allows you to retain ownership of your goods until your customer makes full payment. For “high risk” customers, also consider including obligations to ensure easy repossession – for example, require your customer to store your goods separately from other suppliers’ stock and include a right of entry on to your customer’s property.
- Reduce your Debtor Days
Timely invoicing can encourage timely payment. Issue your invoices within 24 hours of delivery, preferably by email, and ask your customer to confirm receipt. Make payment due on the date of the invoice and allow the customer a maximum 30 days credit. If your customer makes late payments consider requiring payment upfront.
- Discount for Early Payment
The earlier you get paid, the lower your risk. Offer your customers an incentive to pay you before they pay others – for example, a small (3-7%) discount for making full payment within 10 days.
- Credit Insurance
Offset your risk by insuring against the possible default and insolvency of your customers. This, of course, comes at a cost and may not be suitable or available for all businesses. Your insurance broker is best placed to advise on your options.