Debtors don’t just put pressure on a company’s cash flow. Chasing down late payers is time consuming and de-motivating for staff when they could be spending their time on more profitable tasks.
Most businesses can avoid future difficulties from late payments simply by putting the right foundations and processes in place.
By setting the right expectations up front with your customers, they’ll know how serious you are about your payment terms and you won’t have to become the debt collector down the line.
Draw attention to your Terms and Conditions
Begin by getting your payment terms in order. Decide on the terms you’re going to set and stick to them. Most importantly, make those terms and conditions clear; if your customers don’t know what you expect, you can’t blame them for paying to their schedule instead of yours. Whether you decide to put your payment terms on the front of your invoices, back of your statements or in your proposals or contracts, they should be obvious. Don’t hide them away.
If you haven’t done this up to now, don’t worry. Use the opportunity to review your terms and conditions, and communicate those changes to your customers. You can combine the communication with a general update on service improvements for an overall positive message.
Make sure you stick to what you say though. There is no point drawing attention to your payment terms if you aren’t prepared to stand by them. The more lenience you show, the less your terms will be adhered to. Learn from the debt collection agencies and be firm.
Take down names and build relationships
You should know the names of the accounts payable people in your customers’ businesses. A named contact is always easier to reach on the phone or write to when following up payment, and will prove useful if you need to employ the services of a debt collection agency or tracing agent.
Building strong relationships with those people will go a long way in getting your invoices paid on time too. Always keep those relationships professional. Never allow emotion to force you to lapse on your payment terms. Keep control of the relationship at all times.
Reward good behaviour
It may sound strange but thanking your contact in the accounts department for prompt payment can make a real difference to your cash flow in the future. A quick email, phone call or even a letter or thank you card will be unexpected and appreciated. Accounts Payable rarely receives pleasant communications. Make their day and improve your relationship with them for repeated good behaviour in the future.