Does your business suffer from collections problems? Do you have clients or customers who are having a hard time getting you paid on time? We all have cash flow challenges from time to time, and sometimes putting the brakes on paying invoices is an easy coping method. Slow the outflow of cash until the inflow improves. A logical action.
However, we are in business to make a profit, correct? We provide valuable products and/or services that are worth what we charge, and we should be paid within a reasonable timeframe. An effective credit and payment policy is really helpful here.
Getting your clients to pay, especially those who have a tendency to be slow about it, is an unfortunately reality. Being prepared with several strategies to minimize this risk can make a big difference.
Here are 9 ideas to consider when evaluating your own credit policy, or preparing one for the first time:
1.Get it up front. Charge in advance if you can, so you can avoid chasing invoices.
2. Don’t delay. The time to take action is as soon as the account becomes past due. If the client claims to be ‘tight on funds’, always seek a commitment to a particular payment date.
3. Offer as many different payment options as possible. Credit cards in particular can often make for earlier payments, particular from businesses who take advantage of reward points programs.
4. Define your terms and stick to them. You need to be firm with your trading terms. If your terms are seven days, enforce them with a phone call. What good are terms if your customers know you fail to enforce them?
5. Communicate regularly. Send out your invoices on the same date each month. Be consistent and predictable, and follow up with an end-of-month statement.
6. Be realistic: Don’t fool yourself into thinking you can keep a non-paying client. They erode your cash flow, drain your profits and drive expenses to service them.
7. Grace for complaints: state on your invoices that any dispute over the invoice should be relayed within seven days of the invoice date.
8. Be sure to sound sympathetic. Be professional. If you go ballistic, the customer may turn ugly.
9. If nothing else works, call in a collection agency. The longer you wait, the less likely you are to recoup the debt.
If you don’t have a written policy that outlines how you do business in this area, take the time to create it. Communicate it to your employees and clients, be clear in upfront negotiations, and make it a priority to keep to the plan. Minimize exceptions.
Coaxing clients to pay you can be a sticky situation, and you have to remember that you are not a bank. You have a business to run.
Warren Williams is president and founder of TurningPoint Business Coaching. He provides coaching to growing businesses in Concord and the Greater Charlotte area. Have a question about this article, or a topic you’d like to see covered here? Contact Warren at firstname.lastname@example.org or visit www.TurningPointBizCoach.com.