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One of the problems facing small business owners is the issue of collecting payments for services rendered. The small business owner may find that while the clients are eager to use her services, their enthusiasm tends to lag when it comes to paying the bills. The following are some of the strategies which could help ensure that your don’t have this problem in the first place:
1. Bill effectively
One of the most effective methods of ensuring that your customers pay in time is to bill them effectively. Every invoice you send should be very clearly marked as an invoice should include a unique invoice number, the name of the person who authorized the purchase and their company order number. Your invoice should also include when payments is due (for example, payment due in 30 days or something). You may also want to offer an incentive for paying earlier. For example, offer a 5% discount for payments within 15 days.
2. Know your customers accounts staff
It’s to your advantage to know who is in charge of accounts payable at your customers company. That way, you know who to send the invoice to. Call them three days later to confirm that they received. During this call, ask whether the invoice was received, if there are any queries regarding the items purchased and the prices, and then ask when you will be able to collect the cheque. Your conversation should be friendly queries, they should be addressed immediately.
3. Review your ageing report on a weekly basis
Your reports should specify your current debtors, those over 30 days, 60 days and 90 days. Should current client not have paid you within the 30 day period, call and enquire about the cheque.
Despite your best efforts there are clients may lag in payments, allowing their account to be 60 days, even 90 days overdue. Here are a few strategies which may help you collect from them:
Call clients who are over the 30- day period
One of the biggest mistakes you can make is to have conversation deteriorate to:
‘Hello, its Jill from Craft Planet. I wanted to find out if our cheque for $750 is ready?’
‘No, it’s not. Sorry.’
‘Okay. Tell me when it is.’
You could be very lucky, and they would call you in a day or two to tell you that the cheque is ready. But if you dealing with a troublesome client, you will wait for a very long time.
So, when you make your call, establish whether the cheque is ready (no it’s not), when it will be ready, (ask for a specific date. An answer like we normally issue cheques on the 25th of each month will do) and then make it clear that you will call the day after to confirm that it is ready. Should they tell you that they pay by electronic transfer check the day after the payment was supposed to be made, and should there be a discrepancy, call them again to find out why. Yes, it’s work, but persistence is the only thing that will help you get your money.
Keep detailed records
For each customer call, enter the collection (or accounting) notes recording who you spoke to, and when they said the cheque would be ready. Where possible, set the recall date for the day before the cheque is due.
Stick to your guns
On the surface, negotiating with a client whose payments are overdue seems like offering him an incentive to pay his bills fast and thus, you get some money in. However, you are in effect, setting a precedent, and next time he buys something for you, he may let the account become overdue again, knowing that in your desperation to get money in, you will give him another discount. Also, you will acquire a reputation for your willingness to bargain payments down. Can you afford it?
Returned (undelivered) invoices and/ form letters
These must b investigated as to appropriate address. If a more appropriate address can be found, the customer master record must be changed to reflect it. In addition, the return of the mail as “undeliverable” and/ or “change of address” should be noted in the customer’s collection notes
Use outside collection services
If all else fails, use an outside collection service. Many are willing to work on a commission bass.