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10 Tips to Reduce Debtor Days for Small Business Owners - 13th November 2018
Steady, reliable cash flow is crucial for the survival of any small business - so taking steps to ensure your customers pay promptly should be a key priority.
When your clients consistently pay on time, you'll avoid the dreaded "feast or famine" cycle. You'll be able to pay your vendors, suppliers, and employees on time - and not least of all, yourself.
Implement these ten tips now to start getting paid without delay.
Provide payment terms up front
Before you start working with any new client, always provide your terms in writing. Clearly state your rates, payment due dates, and policies for late payment - including any fees incurred on balances owing.
Invoice Immediately
If you're currently preparing your invoices manually, switch over to an accounting system with automated billing. You'll never forget to invoice a client and you'll eliminate errors as you save time. The first time a client is billed make sure the contact information on your invoice is complete to avoid delays with processing.
Follow up
Reduce terms
Net 30 payment terms are fairly standard in business, but there's nothing
stopping you from asking for payment sooner. Some business owners make payment due
at Net 7 or 10; others stipulate payment is due upon receipt of invoice.Reward early payers
Consider offering customers a 2% discount when they
pay their invoice within ten days. In this scenario, a $1000 invoice would be reduced
to $980 - not a huge loss for you, but an attractive cash-saving incentive for
your customers.
Charge interest
Get paid upfront
Collect a partial deposit - or the entire amount in full - before you provide a
product or service to your customers.Go mobile
Forego invoicing altogether by having your customers
pay on the spot with mobile debit and/or credit payments.
Suspend service
Stop
your supply of products or services until you receive payment. With this tactic
you'll avoid the accumulation of an even greater loss with a consistently late or
non-paying client.
Stay on top of AR
Monitor your accounts receivable on a weekly basis so
you can act fast if a customer hasn't paid on time. An AR
aging report can help you easily track outstanding invoices right in
your accounting software - or create an Excel report you can track manually, if
you prefer.
Final thoughts
When you follow up on a late invoice,
explain why it's important to receive timely payment in order to run your
business effectively. Ask when you can expect payment, and agree on a date.
AV Chartered Accountants - Committed to Your Business Success
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