5 Tips on How To Get Paid in 30 Days or Less
Hi, my name is Adam Stewart, Debt Collection Expert and owner of Debt Recoveries Australia.
Following on from last week’s blog, I mentioned preventive actions on how to prevent bad debt and get paid on time by your customers, thus avoiding having too many cases ending up having to be escalated to a collection agency or legal action.
I am happy to pass on these tips to help any SME’s to get on top of their cash flow and spend more time running the business, rather than chasing up creditors.
1. Have a debt collection system.
Cash flow is king. Any credit manager will know that having a good account receivable system in place is crucial for cash flow for any company.
Sales is the usual indicator of a company’s success. However, if you are not making a profit, what is the point? Companies that survive have a long-term focus on profitable sales, not merely chalking up a big turnover. Profits are essential and cutting margins to generate sales is a sure path to problems. A second important lesson learned is that sales do not really count until they become money in the bank.
The failure to focus on such a basic financial accounts receivables is one of the primary sources of business failure among SME’s in Australia today. So have a system in place to collect your debts. Have a dedicated person that is in charge of accounts receivable and give this priority over all other accounting functions.
2. Have strict terms and conditions.
Do your homework before you give credit. If you are giving credit to your customers, do your due diligence and do not be afraid to say no if they don’t stack up. Ask your collection agency to perform credit checks on prospective clients.
Have very clear, well-written credit application forms and service level agreements. Our legal arm, ADC Legal Litigation Lawyers, can advise on wording for all these type of contracts.
3. Establish expectations.
Make your terms seven (7) days. This sounds strict but this will mean your customer will prioritise your invoice for payment, above all others that have more than 7-day terms.
Far too many businesses fail to make it clear to their customers that they expect to be paid by a certain time. Ensure that your sales invoice clearly sets the date that the payment is expected. It is a good discipline and very acceptable to verify with the customer at the time of the sale that meeting the stated payment schedule will not be a problem.
4. Charge a late payment fee.
This is a sure fire way to be paid promptly within your 7 days credit terms. Charge your customer a fee for late payment. Have it clearly set out in your contract and again on each invoice. Sure, you may think this will scare off potential customers; however, it actually has the opposite effect. Potential customers will be impressed with your stringent accounting principles and will respect you for your sound systems and processes. It demonstrates to them that you and your company are serious about business and serious about payment.
Do not offer a discount for early payment. You have worked hard to deliver your product or service. Discounting it simply de-values your product or service, in the eyes of the customer, so this is a no-no.
5. Make it easy to pay.
Having multiple ways for your customers to pay will speed up the process. It is increasingly easy to provide customers with a multitude of ways to pay. Have a very clear payments process on your website where your customers can easily see how to pay. Get your invoices out on time and have a follow up system in place. Consider the options of automatic pay, direct deposit, electronic services such as PayPal and Google Checkout, and other methods.
If all these tips fail, I encourage you to give us a call. That is what we are here for. It is not a foolproof system and sometimes, they are just not going to pay you and that is that. Do not hesitate to outsource immediately to a collection agency, as soon as the invoice becomes overdue.
If you would still prefer to talk to a debt collection agency to help you prevent bad debt and get paid on time, email me at email@example.com or call 1300 799 511. You may also Skype me at debtrecoveries.
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