You’re probably scratching your head right now! Just how do you create an environment for getting paid?
Let’s just go back a step first…
It’s very easy, at the point of winning business, to get over excited. And you might be tempted to agree to terms that you later come to regret.
That buzz from the sale is intoxicating, but remember collecting the cash is probably the most important part of running a successful company.
After all, if you don’t get paid then all that hard work will have been for nothing. And time spent doing the work could have been spent with another customer, where do you get paid. In effect, you will have lost twice.
So, what should you do to improve your ability to be paid?
Start, even before you make the sale, by making sure your prospective customer is credit worthy:
Run credit checks on them
Ask for trade references and follow them up – this is quite rare in this day and age, but is still relevant in some environments
Set a credit limit for each customer, and then stick to it – you can set a review date, so the limit doesn’t stop your customers from buying more, but still protects you
Remember to regularly run credit checks – a business can run into trouble at any time, so be prepared
Ahead of delivering the product or service you’ve sold, make sure you set out the terms:
Include payment terms in your proposal and contract, and repeat them on your invoice
Ask for invoices to be paid by bank transfer
If customers want to pay by cheque, then you should be adding a surcharge, to reflect your increased bank charges
The best way of improving your credit control is having procedures in place:
Invoice promptly – don’t wait until the end of the month – do it once you have delivered the product or service
Once you’ve sent the invoice, follow up with a polite call ensuring your invoice is in their system
Review your debtors (those customers who owe money) every week, and chase promptly – don’t let it go too long
Once you’ve been promised payment, diarise the date so you can check receipt, and chase as necessary
Develop a relationship with a key person in the accounts department – it will be much easier when you have a champion at your customer’s site
Make sure you know your customer’s payment cycle – there is no point in chasing if they only have one payment run per month
Any payment you receive that is not online, make sure you bank it as quickly as possible
Separate selling/customer delivery from credit control. Clients tell us that they feel it affects the relationship between the sales team and the customer, when they have to ask for money
Vitally, don’t feel guilty about asking for outstanding payment. You’ve delivered the goods/service, now it’s time for the customer to deliver!
This might seem very time consuming, but we promise, get the systems in place, and it will pay dividends. Remember – a sale isn’t a sale until the money is the bank – up to then it’s just an expense.
According to the the Creditsafe Q3 2018 Industry Watchdog report, bad debt has risen by over 30% and the average figure for bad debtor days is 16.
Don’t join those statistics, by getting it right now. Your new mantra needs to be maximise the cash, and minimise the stress!