Get Paid On Time Every Time - Take Control With A Commercial Debt Collection & Prevention System June 3, 2008
Posted by janey in : commercial finance , trackbackThe harshest hazard for Growing Business Entrepeneurs in the UK isn’t lack of Customers, it’s Negative Cash-Flow.
It’s all too easy for the Growing Business Entrepeneurs to drop into the practice of first of all not seeing when Customers start to stretch their Payment Terms. There are three problems with this; firstly, financing the really does cost money, secondly, it increases your risk of losing the money all together, and thirdly it gives you the reputation of being a soft touch.
When cash gets problematic for your customers, they will prioritise their payments in order to survive with the minimum disruption to the business. If you’re recognised as a soft touch, you’ll unavoidably fall to the bottom of the Payment List. If you’re recognised to be on the ball and run a tight ship, you’ll inevitably [spin]climb|jump|float|rise[/spin to the top of the Payment List
That’s why it’s absolutely vital for EVERY business to have a good System in place from day one for Credit Control, Overdue Invoice Chasing, and Debt Collection Process.
Here are some good habits
Make sure you have a good set of Terms and Conditions, which setout your Payment Terms, When Ownership of the Goods is transferred and When Risk in the goods is transferred. Of course there are many other items to consider depending on what it is you’re selling. An excellent starting point is to study several of your competitors’ Terms & Conditions, then get a Lawyer specialising in Commercial Law to draw up a form of Terms & Conditions that suits you.
Have your Terms and Conditions printed on the back of your Invoice Forms, get new Credit Customers to state that they accept them before they take any goods, and publish the Terms on your website.
Always have orders confirmed in writing, and use a Courier that gives you a signed receipt for the Goods.
These first three steps assure you the best chance to enforce your invoices before the courts. The fact that your Debtor knows this makes it unlikely that he’ll push his luck, especially when you demonstrate that you also have a well structured Debt Collection Process.
Think about whether you need to sell on credit at all. If your average invoice is quite small, offer Credit & Debit Card Payment Facilities instead of Credit Accounts. After all, these days, if someone can’t get a credit card, should YOU be granting them credit?
Review all overdue invoices on a weekly basis, and have a system of standard letters which start chasing the money within 7 days of an account falling overdue. Most Book-Keeping Programmes will provide these reports Automatically.
Your Free Sample Debt Collection Letter needs to be part of a system, and it’s vital that the Debtor should know that they are in a Debt Collection Process which is trundling unstoppably and at a rapid pace to a conclusion, and that it’s costing them more with every day that passes.
This ensures that, even when the Debtor is struggling, you are the number one priority on the Debtor’s Payment List. It minimises the chance of Slow Payment becoming a Bad Debt Collection Situation.
I use a Debt Collection Process System called Get Paid Not Pain. It trains and incentivises your Customers to pay on time every time, and it has all the tools for stopping Slow Payment and Collecting Bad Debt.
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