Credit Control is probably not the task business owners have in mind when starting up a business, but it is necessary to keeping your business healthy and maintaining good cash flow.
Unfortunately many independent businesses struggle to find the time, energy and resources to collect outstanding debt. Here are 10 tips to help you receive payment on time and improve your cash flow:
- Draft a clearly written payment policy to prevent problems. Have customers sign the agreement, which states when payment is due and what late fees delinquent clients can expect.
- Include specific due dates on your invoices. Adding the phrase “payable in 30 days” is less firm than “due on 30th”
- Set up company procedures for collections. Define whose job it is to follow up with customers and exactly when statements and reminder letters should be posted and phone calls made. Employees need to view debt collection as an important task, not a low priority.
- Email invoices instead of mailing them to shorten the collection cycle.
- When an account is past due, forget paper or electronic reminders: They can easily be thrown away or deleted. Phone calls and face-to-face meetings are more effective.
- Remain calm and professional. This is a business transaction -You delivered a product or service, and the client owes you money. Don’t yell, swear or threaten.
- Be precise. Don’t let a client end the conversation by saying, “I’ll send something soon.” Get a commitment to a specific amount by a set date. Then summarise the conversation to the debtor so there’s no misunderstanding and send a follow-up email.
- Document every point of contact with clients, including emails, letters, phone calls, etc. You may need it for litigation.
- Follow up each time a customer neglects to honor a payment commitment. Explain that you must be notified when a payment will be late and then ask when you can expect to receive it.
- Hire a debt collection agency. Outsource the job and get this done without letting it affect the day-to-day running on your business.