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How your Terms and Conditions of sale could help limit aged debt


It might be well known that the likelihood of recovering an invoice in full diminishes rapidly the longer it remains overdue, but businesses are too often finding that they have little power to affect this process despite their best efforts.

Aged debt remains a significant challenge for SMEs currently, not just because it represents money that hasn’t come into the business (According to figures from Bacs Payment Schemes SMEs are owed a total of £14bn by customers), but also due to the amount of time and resource that must typically be invested into its recovery.

This delicate balance, which must come at the expense of other, similarly pressing debts, is leading to many feeling they have little option but to write them off – particularly as the legal process can prove costly and hard to enforce.

The big issue is that, with aged debts, the customer’s financial health is a huge concern. The longer the invoice goes unpaid, the less plausible it is that they’re stalling. In all likelihood, they probably just can’t afford to pay.

Urgency is therefore vital. A half-hearted approach will only indicate that you don’t desperately need the money, leading to the customer putting your business further down the list of companies it owes.

A structured approach of emails, letters and phone calls is ideal to exerting pressure, while the resource of a debt collection agency will allow your credit controllers to refocus on other areas. The crucial thing is that experiences are learnt from and that you consider how to avoid this situation in the future.

What many fail to realise is that your Terms & Conditions of sale are a powerful weapon, particularly as paperwork is integral to the collections process whether conducted in-house, through a debt collection agency or in the courtroom.

Three ways to optimise your T&Cs to reduce the threat of aged debt

  1. Ensure that the customer’s signature is obtained before the point of sale, confirming their acceptance of your T&Cs. Nowadays, simply referring them to a webpage isn’t enough.
  2. To help avoid disputes, which can be used as a stalling tactic by customers, request notification within a set period of the delivery or provision of the goods or services.
  3. Should a credit report indicate the customer isn’t in the best shape financially, consider requesting a deposit upfront or a personal guarantee from the director to protect you in the event they enter insolvency.

This must then be backed up by an efficient credit management strategy (take a look at more tips here). We’d be interested to know how much thought goes into your Terms & Conditions of sale, and whether you already include the above? Please share your thoughts below.


Just some of our clients

  • BNP Paribas
  • PNC Business Credit
  • Smith & Williamson
  • Leumi ABL
  • Kroll
  • Harrisons Business Recovery
  • Santander Corporate & Commercial
  • Leonard Curtis
  • SER Contractor
  • Mazars
  • Eazipay
  • Close Brothers Invoice Finance
  • Wote Street People
  • NatWest
  • Midland Rock
  • FRP Advisory
  • Wupwoo
  • Barclays
  • Kreston Reeves
  • Quantuma
  • Construction Recruitment Services
  • Custom Glass

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