As the owner of a small business it is sometimes difficult to have those conversations with your customers about paying an outstanding invoice.
You might have spent ages courting them to become a customer and now you have to change hats and become the “heavy” and chase money they owe.
Whether you want to do business with them in future will determine how hard to chase. Maybe if they are a slow payer you don’t want them as a customer in the future? Consider the amount of time you have to spend chasing them when you could be doing something more profitable in the business.
If the debtor didn’t pay how much of a crunch would it be for your business? Would it be a blip on the cash flow or curtains for the business
Prevention is better than cure!
1. When you get a new customer explain to them what your payment terms are right at the outset.
“Great thanks for becoming a customer I really appreciate it, this next bit can be a bit awkward with new customers but I’d just like to explain what my payment terms are . . .
Practice your phase – speaking aloud until it feels like a really natural thing to say
2. Get the client to complete and sign credit application form – which includes your payment terms. The actual credit references aren’t worth a lot, some people will only put down the two suppliers they pay to terms.
3. Credit Check companies – they have there uses if it’s cost effective.
4. Clearly state on invoices when payment is due – if you can actually put a date down rather than just due in 30 days and obviously your bank details.
5. Reduce your payment terms – if you put 30 days they will pay in 60, if you put 14 days they will pay in 30.
6. Go to COD (Cash on Delivery) or prepayment / deposit
Again make it sound as naturals as possible – “it’s what we do with all our customers”.
7. Have a debtor control system – see below
8. On some accounts packages you can set up a payment link that goes out with the invoice. If your accounts package allows you to do this make sure it’s set up and working.
9. Take staged payments eg. 1/3 deposit, 1/3 on delivery and 1/3 after 30 days
10. Look at your Aged Debtors at least once a week.
12. If the customer uses order numbers make sure they are on the invoice.
1. Get a card machine – they are not expensive these days – it eliminates that delaying tack-tick when the customer / client says they have to set up the payment with their bank.
Start by asking them if they have a credit or debit card – of course they have! – “great, give me the number and I’ll take payment now over the phone”
I’m not good with these card machines so I’d practice first so I don’t look like a complete amateur. Use your own card and you can practice giving refunds as well!
2. Pass the buck! “My accounts person is on at me about your outstanding invoice – would you mind paying it please” or set up a separate email address and email from that, perhaps CreditControl@ or even DebtCollection@
3. Use an outside debt collector – like https://www.thomashiggins.com
4. Take notes of every conversation you have with the debtor including date and time. If they are not in when you call still make a note of it. It may come in handy later, especially if they make promises about payment.
5. If they want to pay in stages insist on the first payment immediately and agree payment date/s for the balance.
Beware of customers who suddenly come back to you after a while – they may have been put on stop by their normal supplier!
Remember it’s your money that they owe you.
Discounts for early settlement rarely work – they still take the dicount when it’s way past the settlement date.
If in doubt about someones ability to pay don’t supply them or ask for a deposit – it can be difficult when it’s a decent order.