Almost every business has to chase debtors – it’s crucial for healthy cash flow. However, time spent chasing debtors is time you can’t spend on your core work. That’s why it’s important to have a debtors collection plan that makes the best use of your time. Here are three simple strategies you should think about for your debtors collection plan:
1. Automate as much as you can
To save time, it’s key you automate your workflow as much as possible.
Set up automatic invoice reminders
Do you have trouble finding the time to email your customers about their overdue invoices? If so, set up invoice reminders in Xero — if you do this, Xero will automatically email reminders to your customers once their invoices become overdue. You can customize the emails’ tone and timing. Sure, it takes a small amount of time to set up, but you’ll save many hours in the long run.
Email all your customer statements in one go
Statements are a great way to prompt your customers to pay you. Your customers can see their outstanding invoices and payment history at a glance. But don’t waste your time formatting and posting statements one-by-one. Instead, let Xero automatically create up-to-date statements for you and then email them all at once. With just a few clicks you can email up to 50 customer statements at a time. You control the format of your customer statements and the email wording that goes with them.
2. Prioritize your outstanding debtors
OK, so you’ve sent reminders and statements to your customers, but they still haven’t paid you. Now it’s time to start telephoning your customers. So who do you call first? Too often businesses chase debtors by starting with the customer at the top of their alphabetical list. They then run out of time to get through the whole list. If you don’t have time to chase all your customers now — then prioritize. Focus on either the biggest amounts or the oldest amounts.
Create a debtors smart list
Sitting in Xero’s Contacts screen is a handy little tool called Smart Lists — it has many uses including helping you target your most pressing debtors. For example, create a smart list that finds invoices that are over $500 and overdue by more than 30 days. Make this list your priority debtors.
Keep an eye on your Aged Receivables Detail report
Your Aged Receivables Detail report should be your go-to for checking the total amount of your outstanding debtors. Make sure to keep an eye on the noncurrent columns. The older your debtors, the harder it is to collect. Tip: always keep your bank rec up-to-date, your report is only useful if you’ve reconciled all your customer payments.
3. Record all conversations with your customers (and record them in one place)
When you’re calling your customers to chase payment, it’s important to make notes about the conversations. Too often, business owners forget what was said and this makes it difficult to start the conversation again if a customer still hasn’t paid you. If your customer tells you that payment is on the way, make a note of this — keep a conversation trail.
Enter notes against your customers’ records in Xero
In Xero, you can keep all your notes within the customers’ transaction records. This means notes are stored alongside your customers’ invoices and payment activity — everything’s in one place and you never lose anything.
Connect your email to your contacts list
Often customers will email you details of when and how they’ll pay you. In Xero, connect your email to your contacts list. Doing this means that your customers’ emails will automatically feed into your records in Xero. All your customers’ conversations and activity is stored in one place — this makes chasing debtors easier.
Automate, prioritize and record. Follow these three strategies and chasing debtors will get a whole lot quicker and easier for you.