- August 29, 2013
- Posted by: Taurus Collections
- Category: Uncategorized
Many of our clients find collection of invoices can be a drain on their company’s resources of time, money and hassle. It is certainly true that due to the recent economic downturn SMEs are finding it ever more difficult to convince their customers, to who they extend credit in good faith, that payment should be made on time. After all, credit is a privilege not a right and you should not be faced with problematic collection of invoices when you put your trust in a customer to pay.
Whilst late-payers are often inevitable in this, and any, climate there are certain measures you can take to keep your cashflow pumping – ensuring that problems involved with collection of invoices are kept to a minimum:
1. Get a credit policy – this is essential to your business. Just as much as a business plan and a marketing plan. Without a credit policy your business is not making money but lending money. There has to be set procedures that your entire workforce can follow, so that they know your business is in business to make money. Search online for “Credit Policy Template” to get an idea and consider drawing one up immediately.
2. Make your customers apply for credit – a credit application can be the most important document you have as it holds all the details about your customer PRIOR to doing any work. From this you can check Trade references, bank accounts, credit history, address, contact details – all of which are crucial to locating your customer should they default. You MUST check out Trade references and find out if their previous suppliers have had problems with collection of invoices the past – any leniency in this department and you are setting your business up for a bad debt.
3. Maintain contact with your customers – once an invoice has been raised, call your customer after 14 days to make sure there are no problems with the invoice. Then 1 week before it is due make a courtesy call to ask if they have a payment date for the Invoice as you are putting together some cash-flow projections. The customer will not mind if the conversation is light, and by now if there is a query on the Invoice they will have had 2 opportunities to flag it up. This pro-active approach can often be crucial to timely collection of invoices, but is often overlooked by SMEs.
4. Invoice on time – one of the best actions you can take, that is in your control NOT your debtors, to speed up collection of invoices is to actually Invoice quickly. If you have a monthly date on which Invoices are sent out, consider revising this to weekly, or even on the day the work was completed. Quite simply: the quicker you invoice your customers, the quicker they can pay you.
There are many other preventative measures you can take to assist in your collection of invoices, but above are a few and this list is by no means exhaustive. Stay on top of your credit terms, remember you have worked hard to get your business up and running, successful collection of invoices keeps it that way!