Government surveys back it up and state that the biggest problem that businesses face is slow or late payments. As you already know, unpaid or late payments can put any company in a great financial risk.
That’s why in this piece we are giving you some tricks of the trade in recovering these debts to save your cash flow and ultimately, your business.
1. Set up a systematic collection process
Some business owners often wonder, “how long before I ask” or “how often should I be reminding them” when it comes to collecting payments. If you’re a start-up, or you’re simply new to the business, you probably have gone through this.
Maybe it’s because you are just afraid that your clients or customers might find you overly demanding. But it shouldn’t be that way. After all, you are in business. So collecting money from those who have debts simply means that you’re just doing the job.
Remember that keeping your cashflow up and running is vital to your business. One way to do that is to set up a process for collecting outstanding debts.
A collection system should outline how much will be incurred for unpaid accounts, how fast are they expected to be paid, and how often you should follow up the clients or customers.
Once you’ve set this up, make sure that they are well aware of this.
It’s also possible that some of your customers have lost their invoices or just simply forgotten to pay. We suggest that you also set up an automated reminder to ping your customers that they still have an outstanding balance.
You’ll be surprised how quickly those debts are paid! That’s the power of a little reminder.
If the payments still don’t reflect on your account, normally you can follow up in 7-14 days to see if a payment has been done.
2. Know your figures and facts
There will be cases that reminders won’t be enough. Sometimes your emails find their way onto the spam folders of your clients so when it comes to email, your reminders are not always guaranteed.
If you try to mail them traditionally, they might also encounter mailing issues so there’s also no guarantee. If these situations continue to arise you might find these unpaid invoices just pile up.
So it might be the right time to turn to the ever reliable phones. Yes, you might want to set up a call with your clients or customers to talk about the issues in their payment. But before dialing up, you might want to know your numbers and facts first.
You wouldn’t want to jump in a call with no knowledge of the figures of the contracts or any transactions. You’ll just embarrass yourself. So make sure to know these facts first:
- What is the invoice number
- How much is the outstanding balance
- The due date
- Dates that you sent your reminder emails and follow up notices
- If you have multiple terms with the client, make sure to place that within reach, too
With the right collection system in place, you can now collect payments from your clients so they can settle their debts immediately.
But if you’re looking for a solution on how to minimise these kinds of situations, wherein clients tend not to pay up, a preventive technique is what suits you. Before shaking hands with anybody, you might want to have them background checked first by credit reporting services.
This way you’ll know which client to engage with or to ignore at all. You’ll also have less unpaid invoices if you’re sure that your client can pay up and comply with their contractual obligations.
