Dealing with Debtors!
Chasing up outstanding invoices and customers who don’t follow your invoice terms is one of the inevitable challenges of being in business. Once you’ve done the work and sent the invoice, it is so important to enforce the payment conditions you have stipulated, because this will have a significant impact on your ability to manage your business and maintain strong, positive cash-flow.
Alexander Laureti from LMS Advisory says “if your money is not in your bank account, you can’t spend it on the things that your business needs”. He also explains that if you’re spending time working on collecting payments from people who don’t appreciate your services or who are continually late with payment, you’re potentially putting precious resources in a direction that is not good for your business.
Laureti provides these tips for following up late payments:
- Make it a part of your everyday job – it is an important part of your business and needs to be a specific part of your role description.
- Schedule debt collection calls during the working week (not on the weekend when people are less likely to answer business calls).
- Come up with payment terms that work for both you and the customer paying late i.e. paying regular instalments rather than receiving a large bill.
If you have a current Xero or MYOB subscription, there are multiple ‘add-on’ debtor management software programs that you can utilise to make this process simpler and more streamlined for you, ultimately saving you time and allowing you to invest that saved energy into your business and building positive customer relationships, rather than chasing debts and unpaid invoices.
Some examples include:
- Xero – Debtor Daddy, ezyCollect, debtograph
- MYOB – DEBT Collect Plus, InvoiceSherpa, ezyCollect
These lists are by no means exhaustive; there are many options.
Debt collection is something that will start the moment you have money owed to you. It must be a priority as it can have a large effect on your business. Laureti says “for your business to grow, you’ve got to be working for the right people and you’ve got to have the right customers coming in to your business” – these are the customers who commit to paying regularly and on time.
If you have any questions please do not hesitate to contact our team on 07 4151 8898.
Lauren Bird | Bookkeeper | The Money Edge