Top 5 Tips to Control Debtor Dollars for Small Business Owners
Steady, reliable cash flow is crucial for the survival of any small business – so taking steps to ensure your customers pay promptly should be an absolute priority.
When your clients consistently pay on time, you’ll avoid the dreaded “feast or famine” cycle. You’ll be able to pay your suppliers and employees on time – and, of course, yourself.
Check out these TOP FIVE TIPS now to start getting paid without delay.
#1 Clear Payment Terms
Before you start working with any new client, provide your terms in writing, always. Clearly state your rates, payment due dates, and policies for late payment – including any fees incurred on balances owing (for instance… “If payment is past due, a weekly fee of 2% will be added on to the total until funds received in full”)
Consider offering customers a 2% discount when they pay their invoice within ten days (so … a $1000 invoice would be reduced to $980 – not a huge loss for you, but an attractive cash-saving incentive for your customers).
#2 Invoice Immediately
If you’re currently creating your invoices manually, you run the risk of forgetting to invoice a client and spending WAY too much TIME keeping track of where things are. It might be difficult to know who even owes you money! Switching to an accounting system like Xero or Wave with automated billing and methods to track your work can solve this. Onsite with a client? No problems! Open the app, create the invoice and email it before you even leave!
#3 Get Paid Upfront
Collect a partial deposit – or the entire amount in full – before you provide a product or service to your customers. There are heaps of payment gateways providing options for this … direct debit, specified payments / plans, credit cards … it’s not just for the big guys! Really great way to be in control of when you get paid for the products and services you provide.
#4 Stay On Top Of It
Monitor your accounts receivable regularly so you can act fast if a customer hasn’t paid on time. Using Xero or Wave makes this easy to do while you drink your morning coffee!
#5 Follow Up
Call your customer immediately when a payment is past due. Refer to the invoice and ask if there’s anything you can do to speed up payment. Sometimes a simple change, like including a purchase order number on the invoice or sending direct to their accounts team, can speed up processing.
Perhaps the most important tip for encouraging prompt payment is excellent communication … having great systems in place will give you the structures to do this easily and regularly.
When you follow up on a late invoice, explain why it’s important to receive timely payment in order to run your business effectively. Ask when you can expect payment, and agree on a date.
If the money is still not coming, offer to negotiate a payment schedule as a next-to-last option – before you have no choice but contact a collection agency.
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