The secret to fast debt collection – start talking!

Steady, reliable cash flow is crucial for the survival of any small business – so taking steps to ensure your customers pay promptly should be a key priority. It is easy to feel overwhelmed and to take your eyes off debtor collection but the truth is it is easy to collect your debts quickly , you just have to stop emailing and start talking! Business is all about human relationships and this is never more evident than when it comes to collecting debt. Your customers will find you much easier to ignore  if you are only a signature on the end of an email, but once you remind them that you are a person, a friendly yet no nonsense person, you will start to see the money roll in.

When your clients consistently pay on time, you’ll avoid the dreaded “feast or famine” cycle. You’ll be able to pay your vendors, suppliers, and employees on time – and not least of all, yourself.

Start talking and implement these ten tips now to start getting paid without delay.

Provide payment terms up front

Before you start working with any new client, always discuss your terms , them confirm them in writing. Clearly state your rates, payment due dates, and policies for late payment – including any fees incurred on balances owing. Ensure that they know exactly what they are signing up for – then you can avoid awkward conversations later down the track.

Invoice immediately

If you’re currently preparing your invoices manually, switch over to an accounting system with automated billing. You’ll never forget to invoice a client, and you’ll eliminate errors as you save time. The first time a client is billed make sure the contact information on your invoice is complete to avoid delays with processing. Ask your client if they have a contact in their accounts department who they would like you to communicate. If you can get an accounts contact, you are already well on your way to collecting those payments.

Follow up

Call your customer immediately when a payment is past due. Ask for the status of the invoice and if there’s anything you can do to speed up payment. Some times a simple change, like including a purchase order number on the invoice, can speed up processing.Ask them to confirm a payment date – lock them down to a commitment.

Reduce terms

Net 30 payment terms are fairly standard in business, but there’s nothing stopping you from asking for payment sooner. Some business owners make payment due at Net 7 or 10; others stipulate payment is due upon receipt of invoice. The choice is yours so you set the terms according to the needs of your business.

Reward early payers

Consider offering customers a 2% discount when they pay their invoice within ten days. In this scenario, a $1000 invoice would be reduced to $980 – not a huge loss for you, but an attractive cash-saving incentive for your customers.

Charge interest

As part of your terms, specify that if a client’s payment is past due, a weekly fee of 2% will be added onto the total until funds are received in full. Include this in your initial discussions with your customers so that expectations are set up front.

Get paid upfront

Collect a partial deposit – or the entire amount in full – before you provide a product or service to your customers. This is a very common practice and you only have to ask to have this set up. Once your customers deal with you once under these terms, it will become just another part of doing business with your company.

Go mobile

Forego invoicing altogether by having your customers pay on the spot with mobile debit and/or credit payments. Set up electronic payments in Xero ( Call us if you need any help doing that)

Suspend service

Stop your supply of products or services until you receive payment. With this tactic you’ll avoid the accumulation of an even greater loss with a consistently late or non-paying client.

Stay on top of AR

Monitor your accounts receivable on a weekly basis so you can act fast if a customer hasn’t paid on time. An AR aging report can help you easily track outstanding invoices right in your accounting software – or create an Excel report you can track manually, if you prefer. Use the expected date function within Xero to keep a track of when your customer has promised payment, and then, on this day, follow up with a phone call showing your customer you are right on top of this collection game.

Final thoughts

The most important tip for encouraging prompt payment is excellent communication.

When you follow up on a late invoice, explain why it’s important to receive timely payment in order to run your business effectively. Ask when you can expect payment, and agree on a date.

If the money still isn’t forthcoming, offer to negotiate a payment schedule as a next-to-last option – before you have no choice but contact a collection agency. Although we love our technology at Balance Advantage, we also recognise that nothing can beat human communication so get talking… and watch the money start rolling in.


If you need any help collecting your outstanding debtors please give Balanced Advantage call on 1800 883 439





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