One of the biggest issues facing all business owners today is cash flow, that is getting paid by your customers and being able to pay creditors.
If you can collect all of your debts you are in a better position to pay your own debts. If you have supplied goods or services to your customers it is a reasonable expectation to be paid in a prompt manner.
Here are some tips to help you collect your payments due in a timely manner.
1. Offering Credit Accounts: When offering credit you need to consider your customers past payment history, along with the average spend to determine whether they actually do need credit, or a cash account will suffice.
2. Terms & Conditions: These are important. Make sure you document clearly your terms and conditions of trade in any contract or invoice you are entering into with a client. If a debt goes bad it will be harder to seek legal avenues if the customers’ obligations are not clearly set out.
3. Prompt Payment Incentives: Offering prompt payment discounts is a very effective way to get your invoices paid on time. You can try offering a discount of 2-5% if the invoice is paid within 10 days.
4. Payment Options: Providing convenient payment options for customers can help speed up the payment process. Some customers like to pay using online banking, others prefer credit card payments. Making the payment process easier for your customer will make it easier for you to receive payment.
5. Customer Communication: Make sure your customers have received their invoice and there are no problems. Contact the client before the invoice is due and again after if payment hasn’t been received. Explore options with the client to receive payment rather than it becoming a bad debt. If the customer cannot pay, get them to commit to a date and amount for when the payment will come. When you are specific about details they are far more likely to pay you. Keep detailed records of all communications with the customer; this will assist you on following up on the commitments received from the customer.
6. Keep your Debtors Records up to date: There is nothing worse or more embarrassing than chasing a debt that has already been paid by the customer.
7. Provide Good Customer Service: Always service the client promptly and efficiently, late or non-payment can be a signal of poor service or a lack of communication with the customer. If there is a potential issue, try to identify and rectify the issue. This is an easy way to avoid the same issue in the future, keep your customers happy and ultimately receive the payment.
By working with your customers you can help make the payment process smoother and an easier experience for both parties involved which will help achieve your ultimate goal of being paid and on time.
If you have any further questions or would like to discuss this matter please do not hesitate to contact Logan Granger.
Disclaimer – While all care has been take, Johnston Associates Chartered Accountants Ltd and its staff accept no liability for the content of this article; always see your professional advisor before taking any action that you are unsure about.
JOHNSTON ASSOCIATES, Level 1, One Jervois Road, Ponsonby, T: 09 361 6701, www.johnstonassociates.co.nz
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