Do you wish that you could collect overdue payments better than you do now, but don't quite know where to start? With just a few simple actions you can cut your debtors list down to size and get more money in the bank.
A few years ago, a company invested in my business coaching program to try and save themselves from a terminal cashflow position. Sadly they were so far in the red, with creditors already queuing at their door, that they were beyond saving. Their rent was long overdue, their biggest customer owed them something like £ 32,000 and refused to pay it, and their credit control process was so poor that they had lost the battle before they ever met me.
If they had taken some simple steps a year or so earlier, they would have been saved. Here are the steps to take in your business if you have late payers and struggle with invoice collection …
1. Produce an Aged Debtors report every week. This is simply a list of how much is owed to your company by your customers, and how much is 1 month overdue, 2 months overdue, and so on.
2. Create a simple script for a phone call that asks each customer if they've received the invoice, tells them it's overdue, asks if there are any problems and asks when payment can be expected.
3. Write three standard credit control letters to be sent at 1 or 2 week intervals – a friendly first reminder, a formal follow-up letter and finally a harsh final notice giving them a week to pay or it will go in the hands of your solicitor.
4. Put anybody who has received the second letter on to stop.
5. Keep track of persistent offenders and put them onto cash on delivery terms so that they are not given the chance to borrow your money again.
Putting the above process into action, as a priority for one of your team to manage, should give incredible results. Using standard letters from my business coaching program, many clients have reduced their overdue invoices by 50% or more within 5 weeks of putting this into practice. You can get copies of these letters and the script for calling your customers to gently nudge them by sending an email via the contact form on my website.
Poor management of your invoice process is a serious problem for your business, especially in an economic downturn. Be the one who shouts loudest and you'll collect your money first – don't think that "being the nice guy" will help your business – it will gradually kill it.