Chasing slow payers is an unpleasant reality for small business: Here are 9 bulletproof tips to get you paid faster
Even though it has been reported that payments to small businesses have improved in Australia over the last few years, the chances of bad debt occurring for SMEs still remains high.
Cash flow is the lifeblood of any business, and with over 49% of business closures attributed to poor cash flow (according to the ASIC insolvency report), it’s imperative that business operators have adequate provisions in place to manage this function of the company. So as a small business, we have outlined what can you do to keep your cash coming in and mitigate bad debt to be more sustainable long-term.
1. Make sure you have sufficient processes in place
Plan out your account receivable and management process from when you on board a customer to when invoices are paid and to all the way through to an event of non-payment. It’s important to note that regardless of the value of the sale, this process should be followed and enforced to make sure you’re consistent in the recovery of money owed and portray your serious about this function of your business.
2. Know and understand who your customers are
With advancement in technology and publicly accessible information, there are now more than ever plenty of sources of data available about your customers. Especially with the introduction of new credit reporting known as ‘Comprehensive Credit Reporting’ (CCR), allows you to be able to access credit reports of your customers to be able to make more informed decisions.
You are able to review the following;
- Check the company registration on the Australian Business Register using their ABN
- Check their information on the Australian Investments and Securities Commission
- Carry out a credit check.
This information enables you to not only define your terms of trade with your customer, but to validate if you want to partner with them in the first place to safeguard your own business interests.
3. Set appropriate terms
Its important to make sure you have respectable trade terms, both for yourself and for your customers – as this could potentially be the driving factor behind slow payers. When you’re reviewing a new customer and conducting due diligence, make sure you use this information when determining the terms of the relationship. For example, for customers who have a weak credit history, you may want to tighten the terms to minimise any potential risks and obviously, be more favourable to those with good credit standing and business reputation.
Furthermore, do not be embarrassed to ask customers for up-front payments or deposits if you deem them to be a risk to your business. At the end of the day, you need to protect your own business interests and this is a great step to making sure these are protected as much as possible.
4. Send invoices at the right times
Do not wait to send invoices! The sooner you issue an invoice to your customer, the sooner it can be paid. You might also encourage early payment by offering discounts or other benefits to help speed up the process and thus cash flow.
As well as being timely with your invoices, ensure they contain all the relevant information so that they don’t have any excuses as to why they haven’t paid – as missing or incorrect information simply delays the payment process which can hurt your business.
5. Integrate technology into your processes
Nowadays, you do not have to solely rely on sending paper invoices these days. With the ever-growing adoption of accounting software like Xero & MYOB, invoices can be sent using automation via email, whilst also providing multiple payment options to offer more convenient ways to settle an invoice. For example, offering EFT, credit card, direct debit, PayPal or even BPAY provides plenty of options and limits excuses as to why you haven’t been paid yet.
6. Implement a thorough credit control system
This is an essential function of cash flow management. It is vital to monitor payments and keep your finger on the pulse in terms of the money that is owed and outstanding.
As outlined in point one (1), if you have implemented sufficient processes within your business, overdue payments will be identified through your accounting process. That same process will also include the various steps you follow for the credit control process to chase payment to its conclusion.
7. Be Consistent
Reiterating the previous points above. Managing your cash flow is not something you should periodically check from time to time. Make sure you allocate time every day or perhaps week to process invoices, send reminders or follow up on slow payers, as this will help you stay on top of invoicing and understand what is actually going on in an important area your business.
8. Partner with a Debt Recovery Agency
If you engage a professional debt recovery agency to be a part of your accounts receivable process, they are able to manage the entire process from issuing invoices to chasing payments on your behalf without you having to be worries about if certain customers pain on time. There is a growing trend of on boarding a debt collection company to be an extension of your business for a reason – it simply works! They are specialist in what they do, that is, collecting debts. Having access to information and technology not accessible to the general public, allows them to execute proven collection methods to get you paid faster and improve your overall cash flow, which is one of the core objectives of any business.
There are many reasons to partner with a debt recovery agency which we won’t go into completely today, however if your business is impacted by bad debt or slow payers, it will be the best investment decision you make.
9. Don’t panic and remain calm
Cash flow problems can cause tremendous amounts of stress on a business operator, however it’s important to maintain a level head at all times. It can cause escalated disputes that could have potentially be resolved by a simple phone call, so keeping your emotions in check will significantly help you stay in control of the situation and be in a better position to get the matter resolved faster.
We all know that chasing payments is never fun. The time and effort needed to recover debt or chase slow payers can add up significantly fast, so the question you need to ask yourself is, are you better off outsourcing to specialists so that you can invest your time running and growing your business?
About Marshall Freeman
Marshall Freeman is Australia’s leading debt collectors and recovery specialists. We have been servicing over 20,000 businesses throughout Australia for over 15 years, which has set the foundation of deploying industry leading knowledge and collection techniques that simply delivers results that are unrivaled. Whether you need assistance with slow payers or collection of bad debt, we offer a transparent and stress free collection process that makes your debt a priority to get you paid faster.
If you’re looking to partner with a result driven debt collection agency, please feel free to call us on 1300 136 271 or get an obligation FREE debt appraisal by filling in the form on this page.