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.
"It’s interesting how many business owners write off perfectly recoverable debts. "
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.
Want more articles like this? Check out the financial management section.
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.
Click here to read my previous article on ways to improve business invoicing and steps to avoid bad debts.