Encouraging your customers to pay on time often just comes down to putting some solid processes and systems in place.
By creating an internal payment policy that all clients should adhere to (and be made aware of), you can prevent future problems with late payments and save yourself hours of wasted resource on debt recovery too.
First and foremost, your payment terms and debt policy should be kept simple and clear. Internally, you should allow for a degree of flexibility in your terms dependent on the clients. Externally, your terms should be set in stone so that your customers know exactly what to expect when they trade with your business.
This checklist will help you run a tight ship on debt recovery and maintain control of your cash flow:
- Don’t hide your payment terms and processes. Tell your customers up front, explain that your processes enable you to remain financially stable and able to serve, and ask your contacts to agree to your terms and conditions.
- Remind them regularly. At the very least, you should put your payment terms on the front of every invoice and statement you send, for example, ‘due in 30 days’. If you can be specific with the payment date, even better as this will avoid any misunderstanding, for example ‘payment due 27th September 2014’.
- Keep your cash flow healthy all month. If you can, try to invoice as regularly as possible throughout the month – not just at the end or beginning.
- Automate payments where possible. Set up direct debits and standing orders for regular contracts and purchases.
- Keep your database up to date. Always hold details of a named contact with their direct email address and telephone number. Keep this information current and periodically check for any company name or address changes. Any conversations and correspondence should be recorded and filed against your contact information.
- Create a debt collection system, which all personnel should follow should a debt become overdue. Set a standardized schedule of phone calls, emails, letters and further action so that your team can stay on top of debtors easily and consistently. You can read more about debt recovery procedures here.
To find out more about keeping debt recovery simple, please visit www.pjcds.co.uk