Cashflow is so important to the health of any business but even more so for a small business. If you don’t pay attention to your debtor days (how long its takes you to get paid) and get caught in a debtor daze then you run the risk of placing unnecessary strain on your cashflow. Let’s face it, the last thing you want to be doing is making those dreaded calls to chase urgent payment out of your own desperation.
If you prefer to keep your payment reminders more traditional and email/post works, it’s best for you have a look into your accounting system and see if there is a way that you can automate your payment reminder system. Software programs such as Xero and MYOB offer solutions which can streamline this for you.
An option we suggest is to leave the letters for ‘repeat offenders’ or debts that are well overdue. Most debtors aren’t there because they don’t want to pay you and usually its simply because they have been busy, distracted, forgotten or misplaced your invoice.
So why not incorporate some more ‘out of the box’ methods to chase up and collect payment whilst not leaving your debtor feeling that you are annoying them unnecessarily ?
TEXT IS BEST
It’s easy for a debtor to ignore a letter or email that you send them, but a text message ‘ding’ on their phone is quite hard to ignore. It has been proven that this method has a much higher success rate in receiving payments more promptly. The key here is to ensure that your texts are light hearted, friendly and not forceful.
KEEP IT LIGHT
If you are following up outstanding payment by email it is best to avoid using a traditional reminder ‘letter’ attachment and instead use a more customised and personalised approach. This ensures the debtor feels more connected to the debt and it is another opportunity for you to engage with your client.
DON’T DOUBLE DOWN If you have a customer/client who wants you to do further work yet they haven’t paid for the last work you completed then you need to consider the risks of doubling down. If you have doubts about recovery our advice would be to request payment for any old debts before commencing new work. This negates the risk of doubling down.
There is nothing revolutionary in the above techniques but they can certainly be quite effective in reducing your debtor days and improving your cashflow. If, however, you find yourself in the unenviable position of having a delinquent debtor that simply will not respond or pay then it is important that you follow through with recovery action.