This is part two in our series of discussions on helping business owners to get paid on time. Remember, uncollected income is the most obvious impact on your cash flow. Preventative measures will save you the hidden wasted costs of time spent chasing payment. Here are two additional strategies to employ:
Set a collection policy:
The chance of recovering payment reduces the older a debt becomes. Establish firm rules for follow-up, such as: a phone call at 7 days overdue; a letter at 14; another call at 21 days; stop supply or service at 30; turn to more formal approaches, such as collection agencies, at 60 days. In line with this schedule, set suitable options at certain stages such as partial payment, an installment plan, and whether or not future purchases are allowed.
Focus recovery power in the right hands:
Avoid the trap of turning your sales people or service staff into debt collectors. Mixing messages about employee roles will do more harm than good in the long term. Give the job of bad debt follow-up to one person, along with a set of clear guidelines for action and most importantly, your full support.
Do not hesitate to ask firmly for due payment because you fear losing customers. Non-paying customers may not be worth keeping.
For more guidance on cash flow management, accounts receivable and other areas where your business can be improved, please contact Simons Bitzer & Associates by visiting www.simonsbitzer.com or calling 782-3070 for a FREE one hour consultation with one of our team members.