Tip 1: It always amazes me as to how many people neglect to review their businesses debtors list and chase up any overdue invoices. If you’re a one man/woman show so to speak, then you will know that sending out and following up on invoices is time consuming, especially when there is never enough hours in one day to at least try and maintain a modicum of work life balance.
The importance of this however should not be dismissed. If you don’t have the time, ask a family member, spouse or hire someone to do the job. If you’re not being paid for your time & labour and can’t keep up with suppliers, there will be no work life balance and when it comes to totaling the outstanding debt versus your own payable invoices, it becomes quite apparent how those seemingly small invoices could make a rather large difference to your overall business cash flow.
Tip 2: Being consistent when chasing overdue invoices will help you to recover debts whilst maintaining good customer relationships for both your debtors and your creditors.
Are you up to date with overdue invoices?
Tip 3: Contact customers quickly about overdue invoices. If your payment terms are 30 days, begin following up debtors when payments are 7 days overdue.
Tip 4: Send regular monthly statements to all your clients starting with a friendly reminder. Don’t stop there. Follow up with a phone call. Customers are sometimes embarrassed that they can’t pay, so offer a payment arrangement.
Remember all this is for your benefit as legal action is very expensive and should always be considered a last resort.
Do you have customers that won't pay?
If on the other hand you have customers that can’t pay or won’t pay even though you continue to allow credit or complete jobs on an invoice basis, because of course you feel for their situation or because business is slow and you think you need them, it might be time you asked yourself one very simple question. Will they feel sorry for your business when you can’t pay your bills? The answer is no, and by allowing customers credit or continuing to do work for them when you already know it will be impossible or a lot of chasing to even get paid, just isn’t worth it.
The work involved to follow up these clients would be more cost effective to you if directed at marketing to new clients.
Tip 5: Make a stand for your business and stop credit or cease doing jobs for these customers. In the long run, your time is better spent doing things that will reap greater rewards.
TJD Accounting Services
319 Keilor Road