Use this Ultimate Debt Collection Guide to solve your Debtors Delays forever!
|Use very clear terms and conditions AND REPEAT THEM||Regularly remind your customers of what you are expecting.
Hand your payment terms to customers when you do the quote, print a copy of your payment terms on the back of your invoice, re-send payment terms with your invoice reminders. Establishing a clear policy and communicating how you expect everyone to stick to your policies leaves little room for careless and disorganised excuses.
|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).
|Post AND Email your Invoices||A piece of paper is harder to ignore than an email.
Emailing reduces the risk of delay, or the “lost in the post excuse” – but you can end up with your invoice in the in-box of someone on leave. Snail-mail is more difficult for you to monitor when it was received and opened.
|Create an Incentive||Using a small discount for on-time payment can be a great way to hurry things up.
Large electricity companies have been doing this for years. A 1 – 3% discount is probably less than the cost of funding and chasing your overdue debts and therefore money will spent upfront.
|Include some peer pressure||You may be surprised what a bit of peer pressure can do.
Include a note on your invoices saying something like “80% of our customers take advantage of our on-time payment discount – this ensures our debt collections and bad debt costs are low which then keeps our prices down for everyone.” This tactic has worked brilliantly for several tax offices globally, people hate to miss out on something their neighbour is getting.
|Be Brave||Talk about money early on, the earlier the better.
Having a slightly uncomfortable conversation about money and payment upfront, during your sales pitch is much easier (and gets even easier with practice) than having a really difficult conversation about an overdue debt! You WILL ALWAYS be worse off when you make a “sale” to someone who takes your stuff and never pays you for it!
|Never Finish||If you stop chasing your debtors, then your business is done.
Debt Collection is as much a part of delivering your goods and services as the work itself. It should always be front of mind and changing to reflect changing environments, timings and relationships.
Ultimate Debt Collection Tip
Do not at any stage offer any extra discount for full or quick payment.
Discounts can be negotiated up-front as part of the deal,never tacked on at the end
If you agree to an extra discount you are rewarding bad behaviour, avoid offering any further discounts unless BOTH these apply:
- You think you have a very low chance of collecting this debt and you do not want to put any more effort into it, so the discount is really a trade-off against further effort.
- You are definitely not planning to do business with these people again.
Offering a discount on an overdue invoice, outside your already agreed terms, is REWARDING your debtor for paying late, and setting up the expectations that in the future late payment well also lead to another discount.
If you do decide to discount to ensure you collect some money, make it clear that is the end of your business relationship (or change your prices for this customer next time to “build-in” an amount to offset any discount expectations….