Small and medium sized businesses are stretched to breaking point by slow payments, with average payment now taking around 57 days, almost double standard trading terms.
Tackling late payments should be the number one priority for your business in the new financial year. Below are 10 ways you can speed up the payment process and improve credit control procedures:
1. Always credit check customers
The first step to avoiding late payment and bad debts is to always credit check potential customers before handing over goods or delivering a service.
2. Get your terms and conditions right
A clear set of terms and conditions can protect you from late or non-payment, limiting your liabilities and providing you with some security.
3. Reconsider payment terms for repeat offenders
It may be worthwhile considering tightening credit terms for serial late payers. Try to find out why the customer is consistently paying late as you may be able to come to a mutual agreement with them.
4. Stay on top of payments
Do not delay when sending statements and invoices. If you delay you can’t expect to be paid on time.
5. Invoice often
Consider changing some of your processes to ensure invoices are sent as quickly as possible after delivery or completion of the job. This might mean moving to weekly invoice processing or sending the invoice with the delivery.
6. Invest time to safeguard cash flow
Maintaining good, consistent cash flow is all about knowing exactly what is coming in and going out. This will give you an accurate picture of where the business is going, help identify late payers, control costs and ultimately manage the peaks and troughs in your cash balance.
7. Keep close to your customers
Get to know your customers better. It is a good idea to keep an eye on customers’ payment trends to spot any potential problems before they become major issues.
8 – Have the right attitude
When faced with a late payer, politely but firmly ask for payment to be made.
9 – Understand your rights
If all else fails, Australian business owners and managers can consider the various means of legal debt recovery for delinquent debts.
10. Consider more flexible funding arrangements
Work smarter, not harder in 2009/2010 by reviewing your funding to ensure that it continues to meet the needs of your business.
– Greg Charlwood is the chief executive of global debtor finance provider Bibby Financial Services (www.bibby.com.au)