Cash is tight at the moment.
For many it's an achievement to pay the staff on time every month. It's at time like this you're grateful for your customers but you wish they'd pay up more quickly.
It's a quirk of language that managing your debtors is called credit control. But whatever it's known as, it's a vital part of your business that you cannot afford to ignore.
Giving customers time to pay is standard business practice. But just because you allow them 14, 30 or 60 days doesn't mean they should get away with taking twice that long. I happen to know a local business that insists on paying on time, or even early, but they're in the minority. I also know plenty who'll only cough up once you've jumped several hurdles every month.
Here are some suggestions for sharpening up your credit control:
For many it's an achievement to pay the staff on time every month. It's at time like this you're grateful for your customers but you wish they'd pay up more quickly.
It's a quirk of language that managing your debtors is called credit control. But whatever it's known as, it's a vital part of your business that you cannot afford to ignore.
Giving customers time to pay is standard business practice. But just because you allow them 14, 30 or 60 days doesn't mean they should get away with taking twice that long. I happen to know a local business that insists on paying on time, or even early, but they're in the minority. I also know plenty who'll only cough up once you've jumped several hurdles every month.
Here are some suggestions for sharpening up your credit control:
- Set a target. Your accounting system should let you analyze what percentage of your debt is more than, say, more than 60 days overdue. Make a note of that number and set a target of reducing it by, say, 50% in the next month.
- Don't be afraid. You're unlikely to upset someone by asking for money; don't be frightened of losing their business by being a little firmer in your approach.
- Telephone your debtors. Emails and printed statements are easy to ignore; it's not so easy to overlook someone on the phone.
- Take the name of the person you're speaking to and if they try to fob you off by saying the invoice still needs to be authorized, ask for the authorizer's name as well.
- Make a record of every conversation including the date and time, who you spoke to, what they said the next steps were and how long it would take. Next time you call you can remind them of what they agreed to do.
- Don't ignore the small debts because the older they get the harder they are to pursue.
- Do it every day. If you don't have a dedicated credit controller make sure someone gives time every day to chasing debtors.
- Check how you've done. Remember that target you set in step 1? Whether you achieved your target is not as important as whether you've reduced your debtors, because if you have, the process is working. What you need to do is keep at it.
There are plenty of other tips for debt chasing and feel free to add your own in a comment.
One final point. When you give a customer 30 days credit it means on the 30th day they should pay you, not start the authorization and payment process. Remember that and feel free to remind them of it.
One final point. When you give a customer 30 days credit it means on the 30th day they should pay you, not start the authorization and payment process. Remember that and feel free to remind them of it.
