As book-keepers we never cease to be amazed at how lax businesses can be in collecting what's due to them. If your customers are slow at paying then follow these 8 simple steps.
1. Clear procedures
It may sound obvious but ensure you have a defined set of procedures across the business that clearly set out the credit management strategy from the moment a customer first places an order to the full settlement of the invoice. This will improve efficiency and allow your accounts receivables team to adopt a harmonised and professional stance. Review your Aged Debtor list at least weekly - ensure it is up to date and accurate.
2. Knowledge is key
Know your customers. Before engaging with new customers and offering credit terms, perform credit checks (BookCheck can do this for you) and take the time to understand their payment patterns. This is also true for existing customers. Today’s climate means that many businesses are paying beyond terms to protect their own cash flow so it’s important to monitor existing clients for any changes in ratings and company health. If a customer becomes a persistent late payer, take a firm stance and put them on a 'stop list', warning them that further goods/services will not be supplied until all outstanding invoices are paid in full. Keeping in regular contact with customers provides the opportunity to become aware of any potential problems before it’s too late.
3. Speed and accuracy
Invoicing straight away may sound obvious, but this goes some way to reducing what can be an already lengthy process of getting your invoice paid as most customers won't pay until the invoice is received. Additionally, ensure all information is accurate and that your terms and conditions are clearly marked.
4. Make payment easy
Avoid the possibility of the ‘cheque is in the post’ excuse by offering your customers fast and simple payment methods such as direct debits, standing orders and BACS payment. Ensure the accepted payment methods are clearly displayed on your invoice as well as your details. Another way of working with customers to get payment in on time is to offer a small incentive for early payments by way of a discount.
5. Chase promptly
Frequent sales ledger reviews will enable you to quickly identify when credit terms have been exceeded. Acting quickly at this point will improve the chances of payment in full. A polite and professional approach, whilst remaining firm, will demonstrate that you are in control. Send statements where required as some customers won't pay otherwise. If this doesn’t have the desired effect, follow to the next stage of your credit control procedure. There is always the tricky balancing act of maintaining the relationship with the customer whilst trying to get your money in. Tapping into the resources of an outsourced debt collection agency can assist as it enables you to distance yourself from the process, preserving customer relationships whilst the agency focuses on collecting your debt. Recognise that you will be in competition with other suppliers also chasing for their payment.
6. Charge interest
Especially in the current climate, customers will use a raft of excuses to delay payment. Standing firm and charging statutory interest will encourage faster payment.
7. Focus on what you do best
Given its importance to the success of your business, credit control should be an everyday business task. However, with so many demands on a business owner’s time, maintaining the required focus on collecting money can be a drain on internal resource. Outsourcing your credit management can free up this internal resource, allowing it to be focused on winning new business and other core activities.
8. Say thank you
Customers that pay on time are worth their weight in gold. Ensure you thank those that do as this will help to build relationships and could potentially lead to follow up sales.
