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Customer service vs. chasing payments: Getting the balance right
Wed 26 August 2015 - 12:19 pmAdvice | Cashflow | Featured | Managing | Small Business
Customer service vs. chasing payments – it can be tough to get the balance right between keeping a customer happy and getting your bills paid on time.
There are few things tougher for an SME than trying to collect overdue invoices from clients while also keeping them on-side. To ensure this process is made as seamless as possible here are some ideas to help you get paid on time:
Develop a credit policy
This is an important part of the credit management process, so don’t skip over it. It should provide a blueprint on the businesses you will provide terms to, under what circumstances and what the credit limit will be.
Credit reports and due diligence
Set out the steps for how you on-board new debtors. Collect all the relevant information about the debtor: address, directors, ABN, legal name. Assess their creditworthiness: credit reports and trade references.
If you take on a new customer without doing some due diligence then don’t be surprised if their payment terms blow out or their debt accumulates. Every time you take on a new client, ask yourself, “how do I know they are going to pay their bills?”
Credit management tools exist out there to help reduce the risk of bad debt, so take advantage of them! Even the most simple credit report will identify the company you are about to do business with and whether they have been labelled as a credit risk. From here you can decide whether you take them on as a customer, offer them credit terms or put them on COD.
Have Terms and Conditions in place
Let’s imagine a worst-case scenario: a customer has not paid their bills, you say they should, they say they shouldn’t. So you take them to court. Unfortunately, the ruling goes against you because you failed to set the right T&Cs.
Get some third party help, preferably from legal experts, to produce some T&Cs. Then, ensure that clients sign off before any sort of transaction occurs. Your terms should also outline the steps that you will take to collect outstanding debts, including legal action and the registering of payment defaults.
Keep an eye on your clients
Whether you have one or one thousand clients, it is impossible to know what sort of financial position they are in at all times or whether they are accumulating debts with other companies or competitors. Debtor monitoring tools like the one provided by CreditorWatch will watch your customers for you and warn you when they get into financial difficulty. It’s a great way to stay ahead of a bad debt and gives you the ability to move the client onto COD (or put their account on stop) before they affect you.
The squeaky wheel gets the grease!
You should act as though every customer will forget about your invoice. Have a system in place that reminds you to remind your customers for payments.
When the due date comes and goes, phone calls and email reminders will help get your invoices to the top of the pile. Our users place the CreditorWatch membership logo on their invoices and statements too as added encouragement.
Outstanding or slow paying clients
Unfortunately, we all eventually have to deal with a client that won’t pay, avoids phone calls, or disappears completely. This is where you get serious:
Send them a letter of demand highlighting the steps you’re going to take as outlined in your T&Cs.
Register a payment default against them with CreditorWatch – once their credit is stopped by other suppliers they’ll contact you to settle their bills.
Commence legal action.
These practices should provide the backbone of every credit management system. By being cautious about credit, you can keep your clients happy while maintaining a healthy cash flow.
About the author:
Patrick Coghlan is the Commercial Director of CreditorWatch, a credit reporting agency with over 30,000 clients across Australia. CreditorWatch provides credit reports, debtor monitoring and debt collections tools. For more information visit www.creditorwatch.com.au
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