To stay afloat in the current economic climate you need to keep a tight rein on your cash, but according to a recent CPA survey, 25 per cent of small businesses never chase up late payments.
Today’s business tip is all about how to collect your debts and make sure you keep the cash coming into your business.
Today’s business tip is all about how to collect your debts and make sure you keep the cash coming into your business.
Every business needs to have a Client Agreement or Terms of Trade and having your solicitor check it over. It’s important to have an agreement in place in respect of payment terms, interest charges or late fees and to have it clearly in writing before the fact. I also recommend chasing outstanding debts on a weekly basis is vital for your cashflow. It’s a statistical fact that the longer you let a debt go, the less likelihood it will be paid.
It is a good idea of having or hiring someone other than your marketing or salespeople to make the phone calls regarding unpaid accounts. They should be professional and friendly, but firm. They should have a set routine and document everything. If your clients realise that late payments won’t be overlooked or ignored they will begin to improve with time.
As important as it is to be firm, I recommend that a degree of flexibility is required. You have to sort out those that are spinning you a tale from those with genuine reasons for non-payment. For the latter, consider offering a repayment plan that makes the debt more manageable.
With thanks to My Business, July 2009
