Collect Debtors Sooner – 2 keys for Boosting Cashflow

Boost your Cashflow

8 Ways to Encourage your Debtors to Pay Promptly

* Do your customers flaunt your payment timelines?
* Do clients try to negotiate a discount after the work is done?
* Have you ever chased a bill that was already paid?

If you answered “Yes” to any of these scenarios then your business has room for some Invoice Improvement!

Actively managing your Invoices and Debtors (i.e. not just sitting around, whinging, and waiting to get paid) may seem like a big time-consuming task, but so is stressing. Stressing isn’t helpful to your business, or your clients and customers, so use these 2 keys to Boosting Cashflow:

  1. Implement Better Ground Rules
  2. Foster Better Persuasion

make some small tweaks from the list below and customers and clients are less likely to be able to push your cashflow boundaries.

Collect your Debtors Sooner – 2 keys to Boosting Cashflow

KEY 1. Implement Better Ground Rules

Set the rules of the game and then insist everyone follows them – improved control over your invoicing leads to healthier cashflow. Not to mention more time to grow your business in the right direction.

  • A. Set-up
    • Have very clear terms and conditions AND REPEAT THEM – regularly remind your customers of what you are expecting. Hand your terms to customers when you do the quote, print a copy of your terms on the back of your invoice, re-send terms with your invoice reminders. Establish a clear policy and communicate that you expect everyone to stick to the policy,
    • For quicker payments, set-up multiple payment methods – use EFT, PayPal and other electronic payments. Highlight all these opportunities to pay in your terms and on invoices and make it as easy as possible for your clients (and giving them less reasons for excuses).
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  • B. How Invoices Arrive

    At the dispatch stage, an invoice is printed and usually either posted to the client or emailed.

    • Emailing reduces the risk of delay, or lost post – but you can end up with your invoice in the in-box of someone on leave.
    • Snail-mail has the disadvantage that it is more difficult for you to monitor when it was received and opened, but it seems a piece of paper is harder to ignore than an email.

    Wherever possible do both!

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  • C. Collections Pathway

    A system with alerts on overdue payments can offer a tremendous advantage to the business’s cash flow. Collection pathways are the steps your business has in place to get customers from Invoice to Payment. Have a clear and detailed pathway in place – after all this is your money and you have already earned it.

    An example Pathway might look like:

    • FOR REPEAT LATE PAYERS: at 2 days before due issue an SMS reminder: “just a quick prompt to let you know your invoice is due tomorrow”
    • at 1 day overdue, reissue the invoice, with a reminder: “your invoice was due yesterday, here is another copy just in case”
    • 15 days overdue, make a debtors call, and use a script: “Hi I’m sure you know our terms require payment within 30 days and you have now had our invoice for 45 days – I’m just calling to reiterate that slow payers make it more expensive for us to run our business and that leads to price rises, I am sure you don’t want to be the cause of our next price rise….so I am hoping you will be able to settle this in full now, over the phone.”

    This pathway is quite heavy handed, your approach will work best if it is tailored to suit your clients and business style.

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  • D. Follow-up

    It may sound obvious but follow your Collection pathway and be punctual about reminders, debtors calls etc; show your customers you are in business and mean business. The easiest way to ensure you do this is to Keep good file notes about the debtors calls – include, at a minimum for every call: date, time, name and title of the person spoken to and the exact details of every conversation also prevents any misunderstandings and minimises push-back and the runaround – especially when collecting debts from larger organisations.

    Set the stage, and make customers aware of how stringent you are at follow-up – tell potential customers about your process, have the staff follow that same process – if you say you will ring every 5 days then do just that!

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  • E. Closure

    Regularly check for funds received, especially ensuring you match the deposit with the right client and properly manage complex invoicing issues like part-payments or one payment covering several invoices. Review your Bank Statements for Deposits every day (or at least before you make your debtors calls), nothing makes anyone more annoyed, and quickly makes your business operations look bad, than a debtors call for a bill that is already paid.

 

KEY 2. Foster Better Persuasion

I’m not talking strong-arming here! To Persuade: means to convince by appealing to reason. This has nothing to do with misleading anyone – Persuasion is about influencing and altering the way customers and clients look at you and your business.

  • A. Reciprocity

    People are far more likely to give back to those that have given first; while this is business – giving in this context mostly involves good customer service.
    Have you delivered on time? Did the product/service live up to the standard expected? Was there good customer service follow-up?
    Don’t expect your clients to pay your bills on time if you didn’t stick to your word and do what was agreed either.

    If customers have specific constraints, values or needs they are likely to need to comply with these.
    So ask questions and then listen; if the conversation is around how tight things are, delve into the client’s intent or habits about paying on time – if they are always slow payers then most likely they will be slow in paying you, it may be wise to prioritise their requests accordingly.

    On the flip side, people pay the people they like first – not the fairest side of human nature, but a true one, and one that you can easily work with to your advantage simply by being nice!

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  • B. Consensus

    We look to the behaviour of other people and, like it or not, we are guided by the crowd. Include in your terms and conditions discount for early payments rather than a fine for late payment – then publicise it… “80% of our customers take advantage of our on-time payment discount – this keeps our debt collections and bad debt costs low which lowers overall costs and keeps our prices down for everyone.”

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  • C. Authority

    People respond to leadership and expertise – an authority typically has business knocking at their door instead of the other way around. If you are recognised as a leader in your field you can usually charge higher prices which people will happily pay. Always adopt a “no-nonsense” approach with every customer right from the beginning; you are capable, you deliver well and so you deserve to get paid! (if this isn’t the case then none of the tips here will help your cashflow!)

    Don’t shy away from giving Terms to every customer you issue invoices to. Even print a copy of your Terms on the back of every Invoice. Also make sure in the beginning of the sale you include a “quick chat” outlining your expectations about on-time payment – a short matter-of-fact discourse covering:

    • When and how you will issue invoices – and confirm you will send the invoice to the right person who can pay the bill
    • When and how you expect to get paid – highlighting your policies re discounts for early and penalties for late payment
    this usually prevents you getting the run-around later .

    Having faith in yourself and your business enables you to act with authority, and be respected accordingly.

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It will take a bit of practice to adjust your language, improve your processes and to be confident when you need to be persuasive. But being in business is a long term game, and using all of these techniques will give you a much greater chance of winning. For more information have a look at Great Communication is guaranteed to help Cashflow

A bad debtor is not a good customer

Don’t be afraid to walk away it is better to have no customers and spend your time building a good pipeline than DONATING your efforts for non-customers who WILL NEVER PAY!! Unfortunately late payers are common and chasing them is not fun!

 

Do you have a tried-and-true method for debt collection?

 

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2016-12-20T13:08:57+00:00