Many businesses, particularly small ones, suffer from their customers paying them late. I'm not talking about 'bad debts', just slow payers. And slow payment can cripple a business's cash flow.
Here are a few ways to get your money in sooner:
- Always find out exactly what information your customer's accounts department needs on your invoice - and make sure that you comply to the letter (e.g. their order number, date of order etc).
- Find out when your customer does a check run, and by which date your bill needs to be sent in to meet that check run.
- Make sure that your invoice contains the date on which the invoice is due - not just 'payable within 30 days'.
- If you are working to a contract, ensure that payment terms are included as part of the contract that you draw up.
- Monitor your books regularly (every 2 weeks) and start to remind customers who are just a few days late.
- Chase slow payers by telephone rather than letter (at first) and note the date that they have promised payment by.
- Chase again by phone if they have not paid on time.
- When phoning, make sure that you speak to a person who can take action.
- Don't accept vague statements such as "I'll see what I can do".
- Concentrate on the biggest debts first - this will help your cash flow.
- When sending out letters (if the phone calls don't get results) don't make it obvious that the letter is part of a standard procedure (e.g. don't put "1st reminder" or words like that). People will then just wait for the "2nd reminder".
- Don't let late payers get too far behind before considering taking legal action. Before you do this, ask yourself "Do I really need this customer?". If the answer is 'no' then don't hesitate to bring your lawyer or debt collection agency in.
Kaye Vivian is a consultant with over 15 years of experience in marketing communications serving professional services firms. She also publishes The Legal/Accounting Web (http://www.cloud9.net/~kvivian/html/legal_accounting_web.html), a website with marketing and communications tips for CPAs and attorneys.
Copyright 1998 by Kaye Vivian ([email protected]). All rights reserved. Permission to reprint is granted provided this article is not altered and the copyright notice remains attached.