Recovering money: How to speed up payment from customers

In my last article I discussed ways to improve business invoicing and steps to avoid bad debts. In this article I'll discuss recovering money and ways to speed up payment after the invoice has been sent out to your customer.

The easy way to see who owes what

Once you have sent out your invoice including your terms of business, it doesn’t automatically follow that customers will do the right thing and pay on time. You need to be able to easily monitor what is owed to you, by whom and for how long.

A very simple report that you can get from MYOB and other business invoicing systems lists all those customers who owe you money, how much they owe and how long they have owed it for. This gives you a very quick and easy way to see where you should be concentrating your efforts in recovering money.

The more often you can look at such a report, the better your cash position will be. Consider using a report like this as a basis for recovering money.

Statements/reminders – Every week if necessary!

As mentioned, sending out invoices and letting customers know your terms doesn’t guarantee you will get paid on time. You need to let customers know you are serious about getting paid.

The best way to do this is to send out regular statements. Statements not only remind customers it’s time to pay, but let them know you are on top of the situation. If unscrupulous customers get the impression you aren’t organised about recovering money they can take advantage of the situation.

Put yourself in their shoes or those of their accounts payable person. They get all kinds of invoices coming in via mail and email. Which ones are they going to pay first? Those who seem disorganised with shoddy practices or those who appear professional and serious about recovering money?

All good accounting software has the ability to produce statements. You can send them whichever way you prefer, be it mail or email. You can be sure that the suppliers who remind customers about payment are going to get paid ahead of those who don’t.

Debt collection and recovering money

It’s interesting how many business owners write off perfectly recoverable debts. For some reason they feel it’s not worth the effort to employ a debt collection/recovery agency to collect the payment for them. If you have exhausted all efforts in recovering money owed by a customer, I can highly recommend employing the services of a good debt collection agency.

At this stage you may not want to do any more business with the customer so getting tough should not be a problem. Any good debt collection agency should perform their task without you having to lose a customer. Some use poor tactics that can sour the relationship, but there are good ones around who understand the importance of maintaining good customer relations.

You should not hesitate to employ a debt collection agency, as you should have the right to charge your customers for the costs if you have included this in your ‘Terms of Trade’.

A small investment in debt management …

… can save you heaps later! It may seem like a large expense but the cost of not managing debt collection can be very high in terms of lost working capital and accumulating bad debts.

Sue Hirst is the founder of CAD partners (also known as ‘CFO On-Call’), a team of Financial Controllers who can help business owners grow their business safely.

05 Nov 07

Print this item

9 comments | Add your own 1 2 | Next» View all»

Thanks, Sue - whilst I fotunately haven't needed one for quite a while, how about dropping the names of a few collection agencies you would recommend? Grant Hyman from Sydney | Read my articles
Their is an excellent and cheap debt recovery service at www.brownandpartners.com.au which gives templates for letters of demand etc and a debt
recovery process you can follow. Worked for me, well worth a look. Geoff Bishop, Custom Concrete & masonry Armidale. geoff bishop from Armidale NSW
After experiencing a lot of "we don't have your invoice in our system" when we rang to check on late payments, we have adopted a policy of following up all invoices a week after issue with a phone call "just to check it's in the system" and when we can expect payment. It's low key but really works. Wendy Buckingham from Crows Nest, Sydney
My partner is in the debt collection business (which is useful as I am currently setting up my own business - he definately helps with the credit terms). His wisdom is as follows:
Late fees and interest terms are generally difficult to manage if you are not a finance company and often the customer will dispute it and just not pay the late fee. He suggests that you can list the business and the outstanding amount on baycorp (after 60 days and for amounts above $100). You have to have this clearly stated on your terms and conditions though. Seems a bit nasty by 60 days overdue is a long time. It is easier than trying to calculate and collect the overdue interest and the biz can't get any more finance/credt until the baycorp listing is gone.
Also my partner is a fan of the following up. 5 days before the invoice is due, you should call up and see if they will pay on time and whether there are going to be any problems. This sorts most issues before you get those dreaded 'aged' accounts Amanda from Sydney
Hello,
I can recommend an excellent debt recovery service being
Action Mercantile
Tel 1300 651 610
Fax 1300 367 256
Web www.actionaust.com.au
Email angie@actionaust.com.au
They have worked for us in the past and got great results as well as keeping us well informed along the way.
Regards
Sue Hirst
CAD partners Pty Ltd
www.cadpartners.biz
Sue Hirst from Woy Woy | Read my articles
It is really important to check that the client has actually recieved an invoice. I dealt with a graphic designer ~ she did about $600 worth of work for me. I paid her or so I thought. Out of the blue, about 2 months later I recieved this email snotogram from her. It was so long, the scroll bar appeared. The snotogram demanded why I had not paid the entire account. It seems I had not paid $60 of the account, and after investigating it seems it came thru from a mac, and arrived as an attachment on my pc in a funny format that I could not read, so I ignored it. (The other invoices had been in pdf format). I had no problem paying the invoice, at any stage, I was simply unaware that it existed. Her unprofessional behaviour has led to me never using her again, and advising others not to use her. Ring up, and find out if they actually have the invoice!! Heather Smith from Brisbane | Read my articles

9 comments | Add your own 1 2 | Next» View all»

Add Your comments

Preview comment

Name

Website *

Town / city and country

Email (never sold, displayed or given away)

* This will link your name to your site. So please avoid self promotion elsewhere! We delete spam, disrespectful or off-topic comments.