Manage Your Debt and Get Paid on Time
Clinton Savings Bank (CSB) is not a financial advisor. Please consult with a licensed professional who can provide advice tailored to your individual circumstances. While we hope you find this content useful, it is only intended to serve as a starting point. Your next step is to speak with a qualified, licensed, professional who can provide advice tailored to your individual circumstances. Nothing in this article, nor in any associated resources, should be construed as financial or legal advice. Furthermore, while we have made good faith efforts to ensure that the information presented was correct as of the date the content was prepared, CSB disclaims any liability arising from the use or misuse of these materials and, by visiting this site, you agree to release CSB from any such liability. Do not rely upon the information provided in this content when making decisions regarding financial or legal matters without first consulting with a qualified, licensed professional.
Manage Your Debt and Get Paid on Time
One of the most important rules for a successful business is to swiftly collect money that’s owed to you. It should be coming in faster than you must pay it out. This means being able to deal effectively with customers who owe you money, because the last thing you want is a protracted debt collection process that could wind up in court. It’s time consuming, expensive and stressful.
Putting systems in place
Establishing efficient systems means that not only will you get paid faster, but you’ll also reduce the risk of late or non-payers. At the end of the day, prevention’s infinitely better than a cure, so keep the following in mind:
- Offer immediate payment options. Customers often prefer to pay immediately, especially for a job well done. If your business offers a service that customers can pay for using a mobile payment option, then not only do you have the money faster, but you don’t have to waste time sending out and chasing up invoices. Talk to us about the solutions we offer, such as online payments and merchant services.
- Don’t let it wait. If you do have to send out invoices, don’t put off chasing them up. The longer you leave it, it may be harder. If you have a good accounting system, you can set up a flag system, so you know who owes money and when.
Be careful offering credit
You might be tempted to offer credit terms to everyone, but it may be better to be choosy when you’re deciding who to accept. To help avoid fraud be wary of:
- Unusually large orders – watch out for customers that order small amounts, pay on time, and then place a very large order. If you do decide to accept the order, you might want to ask for a deposit upfront or ask for their payment history with other vendors.
- New customers with no credit history. If you are selling to other businesses, be careful as new start-ups often run short of cash.
Be vigilant and set clear credit policies. This is key to protecting your business from unnecessary risks while maintaining a healthy cash flow.
Make it personal
If you can put a human face on the debt, reminding your customers that what they owe is affecting you personally, they might pay you faster. Try:
- Phone calls, since speaking to your customer directly is a good way to personalize the issue, and if there are any misunderstandings, you can clear them up. Sending emails, instead of past due notice, emphasizing the trust you placed in them is also a good way to make it personal.
- Offer a payment plan, so that if your customer is in genuine trouble, they can pay in increments. Consider drawing up an agreement outlining the payment plan.
If you feel that you will not receive payment perhaps agree to accept goods for their resale value or accept a service instead of cash.
Debt collection agency
If you’re still not getting anywhere, it might be time to call in the professionals. They are, after all, experts, and they know what methods work. However, it’s a big step because when you get a debt collection agency on the case, you’re probably going to alienate that customer for good. If they’re a habitual non-payer, you might not see this as any great loss, but it’s still important to think carefully about what the impact will be on your relationship with your customer.
If you want to avoid a stressful collection process, try having robust systems in place so that you minimize the risk of having to chase debtors. You know the saying that it’s easier to prevent fires than it is to fight them, and the same is true of getting paid what you’re owed.