The impact of Covid-19 and the associated lockdown has made it more important than ever to ensure, where possible, that businesses are getting paid on time.
That is why our experts have compiled their top tips and advice for you to consider to ensure that your cash flow doesn’t cause you any problems:
Understand how to approach your debtors in these challenging times
Many of us don’t like chasing payments. To avoid any awkwardness when asking for overdue money, many businesses will send a statement by email or post to their debtors, then stop there.
But, communicating is imperative, especially when it is done early. Not sure when to discuss with your customers? Here are some tips:
- Set the ground rules from the start: when they become a customer
Communicate your credit terms early on and the penalties or actions you will take if payments are late. Emphasise that you will add interest and apply for late payment compensation as authorised under The Late Payment of Commercial Debts Act (1998). Consider stating that if payments are missed, the account will be suspended and legal action could be taken.
- When an order is placed
Remind customers then that payment is expected to be received before or on the due date. Reiterate your payment policy.
- After the invoice has been sent
Once their invoice is sent, contact the customer to first ensure they have received it, secondly, to ensure there are no disputes, and thirdly it gives you the chance to confirm the due date verbally.
- Make your invoice their top priority
In the days leading up to the due date of their invoice, emphasise that this date is not a proposal. This will tell them that you are on top of the agreed payment deadline and they will hopefully prioritise this payment. From this communication, you could also address and solve any issues, or even take the opportunity to sell to them again.
- Still no payment? Contact them after the deadline
Regardless of how long you have waited in the past, aim to contact the customer within 24 hours of the due date. Ensure this conversation is friendly, you will want to receive the payment sooner rather than later. Moreover, the payment could be processing or it could have been an honest mistake. But this reminder should apply some pressure.
- Spell out the consequences of late payment
Adhere to your company credit policy and become more assertive when communicating. The tone of your communication is crucial for this step. Reiterate that you have been lenient based on their previous reasons for late or non-payment, but now the consequences will be applied.
Mention the interest, say you will increase action if the payment isn’t paid and emphasise that this will cost them more in interest – all depending on whether you take this issue to a debt collector or if you are required to litigate.
- Pass the issue on to a third party
Learn best practice credit control process management
Chasing payments plays a small part in credit management. Other crucial elements are to examine possible reasons for late payments, whether a product was not delivered, and any invoices containing discrepancies. The credit management process includes:
- Creating a clear and consistent process for credit control
- Discovering your customer’s credit rating
- Forecast any complaints
- Forecast late payments
- Increasing the Day Sales Outstanding (DSO)
- Maintaining positive customer relationships
- Monitoring customers for credit risk
- Quickly and accurately producing invoices
Understand the support available to you
Our team at Davis Grant have years of experience advising business owners just like you, whatever your concerns. Our cash flow and profit forecasting services can help guide you to your goals.
On 23 September at 10.30 am, we are hosting a complimentary webinar for businesses, where we will discuss how to get paid on time, every time!
You will also…
- Discover lessons to take into the future to improve your cashflow
- Get runs on the board quickly
Don’t miss out on this opportunity. Book here: https://us02web.zoom.us/webinar/register/WN_Rz_ZbC8WS6ubCx8ABwH3Tg