Is your business growing but you are still under constant cash flow pressure? If so, it means that you haven’t got your cash flow under control. If you do not keep on top of your cash flow it will have a serious impact on your business – and even cause it to fail in extreme cases.
Here are five tips to help you get paid
1. Make it easy for debtors to pay
It is now estimated that it takes customers, on average, 53 days to pay an invoice, with 60% of invoices being paid late. Debtors know when a business is disorganised and will use this knowledge to their advantage. So don’t give them any excuses. Make it easy for them to pay. Start off by reviewing your invoices and making sure they have all the essential details required to make a prompt payment. Essential details include due date and your bank details for direct transfers.
2. Start calling early
Rather than passively waiting for your invoices to be paid, start call your debtors, with a friendly reminder, as soon as an invoice is past its due date. Numerous research has shown that calling, rather than writing or emailing, gives a much greater chance of payment. This is because it is easier to ignore an email or letter than a phone call.
3. Get more formal
If you are finding your phone calls are being ignored, start issuing formal reminders by email and /or post. The reminder should state that payment is required immediately to avoid further action. The Business Victoria website provides a lot of information on recovering debts from customers, including templates for letters that can be used when contacting clients.
4. Be prepared to negotiate
It may be that your customer is also having cash flow problems and is too embarrassed to tell you. However, if you have been actively calling them and asking them why payment has not been made then there is a greater chance that they will let you know that they are having cash flow problems. If so, you should consider negotiating a payment plan –but make sure that they stick to it.
5. Hire a debt collector
Sometimes you need professional help if you have exhausted all other avenues of pursuing the outstanding debt. Remember that it is the day-to-day business of a debt collector in persuading debtors to pay. If you engage a debt collector that only charges when a debt is recovered, you really have nothing to lose.