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Chasing payments

No matter how small your business is you need cash to meet your payables.

A recent survey we conducted suggested that a small business’ number one mistake was not having ongoing insight into their finances (cashflow). While many small businesses are actually doing a good job of staying on top of their business, they are finding it difficult to get paid. They have to follow up over and over again with a customer.

I recently caught up with a small business that had over $20,000 in outstanding invoices. Some of these outstanding invoices were with large companies that you’d suspect would have full accounts payable departments to administer payments. To make matters worse, this particular business recently had their credit card frozen for non-payment. Not fun.

This situation isn’t an anomaly. Many small businesses are going through the same thing and ending up in a vicious circle of chasing and following up on payment to help fund their ongoing expenses.

To help with some of that pain, here are some best practices:

1. Set your own payment terms including invoicing dates and due dates.

2. Inquire about your customer’s payment cycles before engaging and ask them if they want to be invoiced 100% upfront. Sometimes they are trying to push through allocated budget towards a quarter end or year-end and this structure is welcomed.

3. Require a signature on estimates and in every written communication with your customer include due dates of payment.

4. Ensure you are added into their system with your phone number, backup phone number and full address.

5. Ask for a primary contact to chase for payment and also a secondary contact in the event that the primary contact is out or on vacation.

6. If you need to travel to meet your customer then have them book it and pay for it.

7. Use online accounting software, such as Xero, that connects with your bank account and makes it dead simple to see what money is coming in, what money is going out, and track the “baddies” with overdue payments.

Check back soon for Xero’s dedicated resource about invoicing and payments.

 

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6 comments

Trish Reeve
11 September 2012 #

If you use Xero, that’s great! But consider the add-ons like Debtor Daddy! It’s a great way of just setting & forgetting – allowing you to continue with your business and yet still remind your clients regarding your payment due date.

Gayle Buchanan
11 September 2012 #

Agree with you @Trish, Debtor Daddy is very cool.
For those naughty ones though, Gillian Rossouw shared in our xero bookkeepers (international) Linkedin group a fab tip – if you need help get another bookkeeper to call for you (btw, Gillian is AWESOME at it) sometimes, we can get a wee bit close to our customers so helping each other not only builds better relationships with fellow xero bookies, it gets you your dosh too.

Galen – Kiwipay
11 September 2012 #

Offering credit cards as a payment option on invoices can help to speed up payment on overdue accounts as your clients get up to 60 days interest-free plus many earn airpoints so are happy to pay he credit card.

If your company has an overdraft, the 3–4% you pay in card fees is nothing compared to the interest you pay to the bank.

Graeme
11 September 2012 #

Getting the client to pay for any necessary travel is a good idea. That means that if the customer reschedules or delays anything then you aren’t out of pocket and having to chase up a reimbursement.

Debtor problems? | iif
14 September 2012 #

[...] Xero recently commented on what they see as best practice: To help with some of that pain, here are some best practices: [...]

Mae Parker
21 September 2012 #

People are often afraid to ask for 100% payment up front. You would be surprised how many businesses are more than willing to do it. It can’t hurt to ask…or even make it your iron-clad policy. After-all, a lot of money can be saved by NOT having to be a bill collector.

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