No-one wants to work for free. We’ve collected a range of tips and tactics to make sure you get paid for all your hard work.
The Living Room presenter and financial planner Jason Cunningham says it’s important to think about everything up front and not wait until it’s happening, “Every business should have a written procedure for debt collection in place.”
Train your customers
Make sure your customers know your payment terms from the start. Every invoice you give to them should have the payment terms and actual date when the payment is due. If the customer does not pay, make sure you contact them straight away to find out why they have not paid.
Don’t be afraid to drop a customer if they don’t pay. “My late husband taught me never to do business with bad companies as it will only end in tears,” says MacGregor Logistics owner Christine MacGregor. “We only work with companies who operate as we do and who pay their bills.”
Train your staff
It’s important staff are aware of payment terms for their customers. Often sales staff are rewarded for the amount of sales they make and so they may ‘bend the rules’ to book another sale. One way to avoid this is to reward your sales staff once the money has been collected not when the sale is made.
If you have to do everything yourself, event management company owner ‘Jane King’ may have a solution. She keeps her relationship with clients intact by using ‘Agnes’, her low-cost alter ego.
“Agnes is the company’s very stern accounts receivable employee who’s not to be messed with,” Jane explains. “An email from Agnes explaining the terms of the contract usually meets with success.”
Understand your customers’ payment cycle
Many businesses pay their invoices on a regular date, such as the 15th of each month or the last day of each month. Knowing your customers’ payment cycle will help you deal with late payments. It can also help you manage your cashflow – if they pay invoices each Friday for example, you should make sure any outstanding invoices are processed before the Friday so the payment will be made to you on their next payment run.
Jason says the easier you make it to pay you, the better, “A big tip would be to give your clients every available option to pay you, whether it’s Bpay, cash, MasterCard or AMEX. You can also offer incentives like a discount for early payment which can encourage your clients to pay in advance.”
Follow up regularly
Your customer records should include all payment term agreements, customer limits, sales outstanding to date, when they paid and how much they paid.
Once a payment becomes overdue, make sure you start your follow up procedures straight away. It is very important that you speak to the right person to ensure your payment query is dealt with quickly – sometimes this may be someone different to who you have been selling to.
“Emailing and being the loudest works,” says HR Gurus owner Emily Jaksch. “I got debtor days down to 14 through strong processes. We’ve never lost a customer from sending emails or letters of demand.”