Have your accounts team call the customer seven days ahead of an invoice being issued as a gentle reminder that it’s coming and also give them contact details so they can call you to discuss any problems. If you don’t get a response on the seventh day, call again on the fifth and even third day before until you get an answer.
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10 Ways to Improve Your Cash Flow & Minimize Bad Debt
by Anonymous || Dec 11, 2019
Every company relies on prompt payment from their customers to ensure a reliable cash flow.
So what methods can you use to ensure you get paid on time for your products or services?
Here are ten strategies you can use to help ensure you get paid on time.
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1. Charge upfront
While this isn’t always possible, you should always attempt to arrange payment up front for your goods or services. One way would be to offer incentives such as a reduced rate for quick payment.
You should always attempt to arrange payment up front for your goods or services
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2. Let your customers choose their payment method
To get paid quicker offer your customers access to a number of payment channels such as credit card, online payment, direct debit, cash, check or ACH.
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3. Call before you send an invoice
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4. Be quick to follow up on late payments
If a client does fall behind with payments, pick up the phone and call them because there might be a valid reason for not making the payment. Having a conversation gives you the opportuinty for a resolution to be reached amicably, with new payment terms established in writing.
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5. Schedule regular invoices
If you send out your invoices on a monthly basis, ensure they go out on the same day each month, so your customers expect an invoice from you on that day and will hopefully be in a position to pay it on time. If you sell products, send out the invoice with the product and follow up with an end of month statement.
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6. Periodically review payment terms and credit limits
Review the payment terms and credit limits set for your customers - are they still appropriate? Check their payment history: Do they pay on time every time, have the occasional slip or is it a regular theme chasing for payment?
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7. Allow customers to dispute invoices
To ensure you get paid for your product or services, set a realistic period of time such as seven business days for your customers to dispute an invoice. Make sure this stated in writing either in an email or letter.
Is your customer's payment terms and credit limit still appropriate?
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8. Ask the tough questions before things get bad
When setting up a new customer account, don’t be afraid to ask them awkward questions if it means you get all the information you need at the start of the business relationship. It will be harder to get it at a later date.
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9. Use collections as a last resort
Unfortunately, you can’t always avoid customer accounts from becoming bad debt. Before you write them off, give the deliquent customer a three month improvement period as their circumstances might improve and then you can renegotiate payment terms. However, this is not always the case and a collection agency may need to be employed.
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10. Be proactive
The most reliable method is to check out your customers before extending them credit in the first place. As positive and negative business changes can happen at any time, use business credit reports to ensure your client is creditworthy and you can adjust your credit limit and payment terms accordingly.
