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6 Key Steps to Avoid a Bad Debt in Construction


Every year 1.5% of companies in the construction sector go into administration. If one of these owes you money at the time, then it's very unlikely you'll see more than a fraction of what you're owed. Getting caught by a bad debt is one of the principal reasons that businesses fail, but what can you do to protect yourself?

See also: Step by Step Guide to Getting your Invoices Paid on Time in Construction

1. Check out your customers before you give them credit

Ask them to fill out a credit account application form

Get a credit report on customers that want to buy on credit

2. Ensure customers sign up to your Terms and Conditions

This will put you in a much stronger position if things go wrong.

It is a good idea to ask customers to sign to accept your general terms and conditions on the credit application form.

3. Invoice accurately and as early as possible

Don't let your processes be an excuse for your customer to avoid paying your bills

Make sure your invoices have all the right information on them - see this handy infographic for more information

4. Contact Accounts Payable well before the invoice is due

Check they received it

Ensure there’s no problems and confirm a payment date

5. Add Interest and Compensation to Late Payments

This tends to get the attention of a late-paying customer! You have a statutory right to claim interest and compensation.

Use our online late payment calculator to see how much you can add

6. Be Alert to Changes in Customers Financial Circumstances

Look out for changes in payment patterns

Credit Check your customers regularly and at least annually

Collecting your money quickly and to terms each month reduces the amount you have outstanding with customers and reduces the risk of a bad debt. My Credit Controllers has long experience of helping construction companies with collection of payments. Get in touch now to see how we can help.

Useful Links:

Submit an Overdue Invoice Online for us to Collect
Late Payment Interest Calculator
Check if a company is still trading