Extending credit to customers (whether they’re individuals or other businesses) is like making a pact. You do them the favour of letting them have your products on the assumption they’ll have the funds to pay for it later on. What do you do to make sure this pact between you and the customer is honoured?
You need to be proactive with these customers unless you’re willing to give away products and services for free. Don’t be afraid to have a business that insists on being paid on time – falling into a cash flow crisis is definitely a scarier option to face.
How do I make sure my credit terms are clear?
You have the opportunity to explain your credit terms at the point of making the sale and more commonly, when you start sending invoices.
Print out everything they need to follow through with their payment, such as your credit terms, a clearly displayed due date, an accurate list of products or services delivered and your accepted methods of payment so you can include this information in every invoice.
There’s a way to be proactive without being annoying… right?
It all boils down to communicating to your customers with respect. If you’re making calls or sending out letters, make sure your tone is more professional than tough. There’s a big difference in giving polite reminders and badgering or harassing people when they owe your business.
A smart way of respecting their time and convenience and still staying on top of your collections is to following up at different intervals: immediately after the sale, 15 days after, 30 days after, and even 60 days after delivering products and services from your end.
Which accounts should I to prioritise?
Identify which customers have owed you cash for the longest and these are the ones to chase up first. You may also want to focus on collecting monies owed from any high risk clients, these could be those that have taken a while to pay in the past, those you know are having business difficulties or potentially new customers who you don’t yet have a long term relationship with yet.
When should I negotiate or hire an agency to collect?
There are times when you may need to stop extending a service or doing further business with a customer because he or she has taken too long to pay up. In order to get at least some of your money back, you could negotiate a discounted price or hire a third-party agency to collect these debts for you.
Considering which action to take will depend on how much cash you can recover from each option and which one can resolve the debt situation best.
At the end of the day, you still need to prioritise your business’s financial health and cash flow over customers who continue to give you headaches. When you’re staying on top of collections, you will have more funds to help grow and improve your business and provide a service to the people who matter.
To learn more about business and cash flow management, you can contact Omnis Group at 9380-3555 or 1800 99 66 90. Our friendly team of professional business advisers and accountants are more than willing to help.