Date: 19th August 2011
It’s a dog-eat-dog world out there. The business money-go-round is a little stretched and we often see a domino type effect as businesses pay businesses which pay businesses. There are some tricks to minimize your exposure and like any relationship, it comes down to communication.
1. Put it in writing
Set it right, from the start! Clearly state in writing your terms and conditions of trade and when payment is required (your credit policy), making sure that the terms are relevant to your business and industry. Include your terms on all quotes, estimates, agreements and related documentation.
2. Who are you actually lending money to?
Extending credit is quite simply giving someone a loan. In our day to day life, we would think long and hard before handing over any money to someone we didn’t know based on a handshake
3. Invoice promptly to get paid faster
Getting the invoice out promptly and ensuring the details are accurate will improve cash flow, customer relations and even retention in no time. Remember to add important details such as the amount due, along with the date and preferred payment method or even some payment options.
4. Know who owes
Set up a system that lets you identify who owes you money easily. It is okay to follow up late payment. Take a deep breath and make the phone call. Communicate politely!
5. The bottom line…
Being vigilant about your accounts receivable is vital. Where there has been a breach of your agreed terms you need to follow up promptly and effectively.
There is a clear connection between the age of the debt and the likelihood you will be able to collect payment: the older the debt, the less likely it is you will be able to collect it.
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