Managing debtors and getting paid on time is crucial to the survival and health of your business. Running a business is about so much more than simply finding new customers and delivering a high level of products and services. You need cash flow, which means getting paid in full and on time.
Debtor management can be a real stress point for business owners, who often put their heart and soul into running their business and don't like the thought of having to fight to get paid. Putting the right processes in place to manage customer payments could be the difference between struggling to make ends meet and thriving.
Here's 5 things you can implement right now to see a real change in your debtors.
1. Be clear about your payment terms
There's no one-size-fits-all when it comes to payment terms. It depends on your business and the type of product or service you deliver. The most important thing to remember is, it should be easy for your customers to pay you. Be clear about when you expect to be paid by stating payment terms on quotes, contracts and invoices. You should include things like:
Amount owed with a clear due date
Billing address and bank account details
Utilize any 'pay now' functions your accounting software may have if sending invoices digitally
Offer multiple payment options, if possible
Consider offering discounts for early payments, or penalties for late payments
2. Send invoices promptly, with reminders
Try not to let too much time pass between completing the work and invoicing your customers. If a customer has received your product or service, they should have your invoice as well. Allowing too much time to pass means you lose momentum and things can be forgotten.
If you're sending invoices immediately but still aren't receiving on-time payment, it might be time to look at your follow-up system. Do you send payment reminders? Do you make regular contact with your customers via phone or email? A friendly reminder that an invoice is due soon might be better received than a rough demand when a payment is late.
Some customers will only pay upon receipt of a statement, so be sure to send these regularly to avoid invoices aging past their terms.
3. Watch for struggling customers
If you pay close attention to your customers, it should be easy to tell when they are going through a rough time. The first step is to make friendly contact to find out if there is a reason for late payments. A little conversation goes a long way!
The key with customers experiencing financial hardship is not to add to their difficulty by demanding full payment. Consider making arrangements with them to have their account paid off over time. After all, a little payment is better than no payment. Work with these customers and be sure to check in with them regularly. It may be wise to stop supply of products or services until their account is back in the black.
Leave collection services or court action as a absolute last resort. Most times, with patience and persistence, even the worst customer accounts do come good again.
4. Get invoice details right
Your invoices need to be going to the right person, with the right information. Check the email address you have is still correct, and your contact person is still the right one to receive your invoices.
Be as detailed as you can on your invoices, clearly stating things like job numbers, customer reference numbers, purchase order numbers, descriptions, cost break-downs and unit prices. Sometimes an invoice may sit unpaid simply because the information you provided wasn't clear enough and needs following up.
5. Stay in front of them
Be present in your customer's minds. When it comes time for them to pay their suppliers, you want to be at the top of their list. If your customers know you'll always make contact when payments are due or late, they will be more inclined to pay you on time. It's true - the squeaky wheel gets the oil. Customers will want to avoid the hassle of repeated contact, so they'll pay you on time.
By taking these simple steps towards becoming more proactive about your debtors, you'll begin to see a turn-around. Customers might not catch on right away, but rest assured, with consistency and perseverance, even the most difficult customer can begin to make a change.
Want help getting on top of your debtors? We'd be glad to chat. Contact us now to talk about how we can partner with you to improve your cash flow.