Like any relationship, timely communication between creditors and debtors goes a long way to avoiding trouble. If you operate on credit terms and are upfront with customers about what payment is expected and when, it’s much easier to follow up with them on an overdue account.
Business owners who keep track of when invoices are paid and what amounts are still owing are in a better position to make smarter decisions, improve cashflow, get paid faster and access capital quickly.
Traditional practices still go a long way to helping small business stay on top of debtor management. If you don’t have large reserves of cash, think about reducing your terms to 10 days or seven days. You should also:
- Be upfront. Explain ‘how we do it here’.
- Quantify fees in advance.
- Bill regularly.
- Bill as near as possible to the conclusion of work segments.
- Where practical, present the account to the customer.
- Provide payment options.
- Consider fixed fees.
- Follow up debts systematically and often.
- Explain the value of the work.
- Build a relationship and show your value.
If your terms include recovering debt collection costs, the Fair Trading Act requires you to disclose your terms of trade to customers at the time credit is given. Make sure to clearly identify terms of trade on your website, invoices, and statements. As well as traditional ways to improve debtor management, online solutions are available that make the whole process easier. If you think your current strategies aren’t working for you and could do with an overhaul, call us for a chat