Your sales income is the main cash flow driver of your business and converting that into cash is one of the most important processes in your business.
Clients who receive sales on credit are referred to as debtors. Managing payments due from debtors can consume both time and effort if proper controls and procedures are not in place from the outset.
Your customers are key to your business, however, until you receive payment for your services, effectively you have given them a donation, and you are not a charitable organisation.
Here are some helpful hints to consider when managing debtors:
Establish payment terms and clearly communicate these at both quotation and invoice stage. You can also provide a reminder a couple of days prior to completing the job.
Implement internal or external debt-collection systems to ensure all payment terms are met. Hire an internal debtor’s clerk or use existing administration staff. Use an external service if your internal structure does not allow for it.
Send out regular reminders and follow up on late payments.
Meet regularly with your customers, particularly regular customers.
Review payment terms for regular customers who continue to fall outside the agreed terms.
When you become aware of a potential delay in a job, communicate with the customer and discuss alternatives, if possible.
Only agree to a completion date with your customer when you are certain you can meet the deadline.
Send out invoices as soon as work is complete, not at the end of the week or month.
Send out invoices via email, not snail mail.
Provide incentives to pay early, if appropriate.
Offer alternative forms of payment, such as cash, cheque, credit card and EFT.
Where commissions are payable, pay them on amounts when collected rather than on sale/invoice.
Identify slow-paying customers and make contact early to discuss any issues.
Monitor non-paying customers and keep in regular contact.
Enter into payment arrangements for non-paying customers.
Stop supply, if possible, for customers who have not met any agreed progress payments.
Send letters of demand for long outstanding debts. If necessary, use a professional debt collector.
Consider not performing any future jobs for customers who have been unreliable with payments.
Always remember that a good customer is one who pays. If you are not collecting payment from them, then your business is funding their business as well as your own.
If you would like to discuss these or other strategies, do not hesitate to get in touch.
http://adpartners.com.au/wp-content/uploads/2017/08/logo.png00Tony Dimitriadishttp://adpartners.com.au/wp-content/uploads/2017/08/logo.pngTony Dimitriadis2018-04-09 22:12:332018-04-09 22:12:33How well do you manage your debtors?
Established in 2001, AD Partners is a boutique public practice Accountancy and Business Consulting firm situated in heart of Carlton, Melbourne.
We service all areas of Melbourne, and offer personalised service to business owners no matter how big or small.