A stop list is a powerful tool for all limited company owners, and a simple way to protect yourself against carrying out further work for non-paying clients.
In principle, it’s simple – if a client doesn’t pay you on time, you place them on the Stop List. When they pay in full, you take them back off it.
When a new order comes in, just check the Stop List – if the company is on there, don’t accept the job.
You’re limiting your exposure to non-paying clients, and freeing up that time to take on work from customers who pay you more promptly.
And when a client asks why you won’t work for them, you can tell them they’re on your Stop List – and you might find that invoice clears much faster than it otherwise might.
However, there are a couple of things you might want to keep in mind before consigning a company to the spreadsheet, evernote or dropbox file that governs your decision-making process.
Sentiment is a dangerous distraction in some business dealings, but if many of your customers are small businesses who you’ve worked with for a long time, a little trust can go a long way.
Don’t react too harshly to a customer who usually pays promptly, but misses a single invoice – you could sour an otherwise happy and trusting working relationship.
The Stop List shouldn’t be an absolute – it’s just a guide, a way of remembering the companies that have caused you problems, and a means of avoiding lost earnings for the future.
Just as you might choose to trust small clients who have temporary cashflow problems, you might also want to be more lenient with your biggest customers.
This time it’s not based on sentiment, but on sound economic sense – a missed invoice for £50 is relatively insignificant if that client pays you hundreds or thousands of pounds each month.
Judge each case on its own merits, or put a fixed percentage in place to decide whether the client goes on the Stop List – whatever works best for you is probably the best approach.
As with all credit control issues, consistency is key.
Once you decide to put a company on the Stop List, stop ALL work for them until they pay up; if it becomes an idle threat, the list is meaningless.
Be consistent in your leniencies, too, so your small-business clients know how much leeway you’re willing to give them if their own customers are late at settling their invoices.
It’s not just outright non-payers who can be placed on the Stop List – big firms that force new conditions of payment can go on there too, so if you invoice on a 30-day basis and they pay on a 90-day basis, give them 60 days of Stop List purgatory and see how they handle it.
The Stop List is, ultimately, supposed to be a way of reducing your risk, maximising your income and speeding up payments, so if it’s not working for you, take a fresh look at the rules you’ve put in place and decide whether they’re a good match for the types of client you serve.
Once you get it right, though, you should see faster payments and fewer unpaid invoices – the core principles of effective credit control.
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