Our blogs often focus on tips to help you collect debts owing by your customers. For example, simply by calling a customer, rather than sending an email, increases your chances of receiving payment. In addition, if you have a policy of verifying credit applications and personal guarantees forms then you can make a more informed decision about the risks involved in extending credit to a customer – so you can avoid problems later down the track.
All of this helps, but there are also business practices that you can put in place that will help minimise problems later on. The following are simple strategies that you can use to assist in getting paid every time you sell goods or provide a service:
1. Agree on a price in writing
Before you begin any work or deliver any goods make sure that the price is agreed to in writing. Even though a lot of businesses get this right, what they don’t get right is negotiating revised prices when extra work is required to be done. You can’t assume that your customer will agree to the revised price – make sure you get their agreement in writing to avoid disputes later on.
2. Contact details are not kept up to date
Your customers can change address without thinking to inform you. The directors of the companies that you deal with may even change without your knowledge. Unless you have a procedure in place that regularly checks changes to the contact details of your customers you may end up 6 months down the track with a long outstanding debt and don’t even have a current residential address to chase for it.
3. Don’t send out goods until you receive a purchase order
Sometimes customers might make you feel pressured to send out goods quickly. Although, it is always good to provide a high level of service to your customers, you still need to make sure that all steps are completed before you release goods or provide services. It is always good to remember that it is better to lose a customer, than provide goods or services and not be paid for them. The first may slow the growth of your company but the second may cause your company to fail.
4. Make sure that you are dealing with the right person
You might think you are ticking all the boxes but have you double checked to make sure you are dealing with the right person in your customer’s organisation? You might be getting your agreements signed but are you sure that the person is authorised to sign the agreements in the first place? By making sure that all agreements are signed by the appropriate person may save problems later on, if your customer decides they do not want to pay.
All these strategies are designed to increase the chances of you getting paid for goods supplied or work done. This is done by avoiding problems in the first place and thus avoiding the stress of cash flow issues caused by slow paying customers.