The most valuable nugget of advice I’ve received about getting money out of overdue customers is to never give them a reason not to pay you. Going into it with a “play nice” attitude can really help stomp out any queasiness you might have about asking for money. Just remember that asking customers for money is a normal part of doing business and to do it well you simply need a system and a commitment to stick to that system.
What system should you use? Why not try out our super easy Squeaky-wheel-system™ :
Get started by making it your mantra to always have xero up-to-date so you can immediately see when a customer doesn’t pay on time (by clicking on Overdue Invoices).
(Day 1) The day after the bill is due get on the phone (or email if you’re shy) and say something like this:
- We’ve noticed that you haven’t us yet
- Do you need more details
- When can we expect payment?
Make a note of what they’ve told you so that anyone in your team can pick up where you’ve left off.
(Week 1) After a week, contact them again saying:
- We still haven’t received your payment
- Are there any problems?”
- How can we help you? Can you make a part payment or post date a cheque? Pay by creditcard?
Update your notes.
(Week 2) Stop credit. If you’re worried that stopping credit will stop your customer giving you more work then remember it’s proven that customers are less likely to use you if they owe you.
(Week 3) The following week let them know that if payment isn’t made within 7 days it’s simply your standard procedure to forward their account to a recovery agency. Sometimes it’s worth mentioning that sadly this may affect their credit records and that they’ll be responsible for the collection costs, if you have a clause similar to the one below in your Terms & Conditions:
- You will pay any expenses, disbursements and legal costs we incur in the enforcement of any rights contained in this contract, including any solicitor’s fees or debt collection agency fees.
(Week 4) Finally, lodge it with a collection agency. The smarter agencies let you do this online and after you’ve done it once it’ll feel like a completely normal business process. Here at Boutique Financial Chartered Accountants we use Waterstone Recovery and have nothing but good things to say about how easy they make the process.
Or avoid all this by simply asking for payment upfront.
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