Overdue payment

When you set up your business did you ever imagine how complicated and time consuming the whole credit management function was going to be and definitely not the chore you had in mind when starting up. Of all the functions apart from sales it is essential that you have firm control of your business finances and cash flow.

Unfortunately, many SME’s struggle to find the time, energy and resources to collect outstanding debt. The following 10 tips will help you receive payment on time and improve your cash flow:

  1. Have a clearly written credit policy to prevent problems and stick to it. Ensure your customers receive and sign the agreement, clearly stating when payment is due and what late fees delinquent payers can expect.
  2. Include a specific due dates on your invoices. By just saying “payable in 30 days” can lead to misinterpretation – include a date when payment is to be paid by “due on 30th
  3. Set up company procedures for collections. Clearly define whose job it is to follow up with customers and exactly when statements, reminder letters should be posted / emailed and phone calls made. Employees need to view debt collection as an important task, not a low priority chore and that includes the sales people who are responsible for managing the client relationship. A sale is not a sale until it is paid for.
  4. Email invoices instead of mailing them to shorten the collection cycle. The invoice attachment should always be in a pdf format. Don’t assume that just because you sent the e mail that they have received it, it could be in their Junk mail! Take nothing for granted.
  5. When an account is overdue, forget paper or electronic reminders: They can easily be thrown away or deleted. Lift the phone and call them and if necessary arrange for a face-to-face meeting to sort out any issues or queries.
  6. Remain calm and professional. This is a business transaction – you delivered a product or service, the client owes you money and you must get paid. Don’t yell, swear or threaten. It will get you nowhere. It could lose you a valuable client who maybe is going through their own ‘temporary’ cash flow problems through no fault of their own. Work on it together.
  7. Be precise. Don’t let a client end the conversation by saying, “I’ll post you on a cheque” – how many times have you heard that one! Get a firm commitment to a specific amount by an agreed date. Then summarise the conversation to the debtor so there’s no misunderstanding in a follow-up email.
  8. Know your customers and document every point of contact with them, including emails, letters, phone calls, etc. You may need it for litigation (hopefully not). Make sure you understand your customers’ payment process and the systems they use, and if possible get to know the individuals dealing with payments on their side. If you give Christmas gifts don’t forget to include them as well.
  9. Follow up each time a customer neglects to honour a payment commitment. Explain that you must be notified when a payment will be late and then establish exactly when you can expect to receive it. Don’t let the relationship end there – call and thank them when you do receive the payment.
  10. Invest in professional credit management training and if all else fails hire a debt collection agency. Like any function your people must be professional, well informed and trained. By investing in your Credit Management team it will give you a source of competitive advantage. If your people cannot resolve the payment issue then outsource the job and get it done without letting it affect the day-to-day running of your business. Take decisive action sooner rather than later.

At Celtic Invoice Discounting, we can help improve your cash flow through transactional based invoice discounting! Feel free to call us to see how we can help you: 01-230 0866.