Every business wants to earn money and make a profit, by offering quality goods and services to their clients and standing out from their competitors. It makes good business sense to then invest this profit back into the business, so they can provide more a comprehensive list of services & offer or manufacture better products for their clients. This profit should also be invested back into the people who work for the business to ensure they are rewarded & trained properly for the job they carry out, this in turn will ensure that clients are then receiving the level of service they would expect.
All of the above makes for the ideal business model, maybe in the world of make believe, but let’s step into the real world of business & 2018. Since the recession and banking crash of 2008, businesses have been suffering badly as a result of Late Payment behaviour by their clients. Billions of pounds are written off by UK businesses each year because of Late Payers . It’s almost become the norm for big businesses to hang smaller businesses out to dry, and not pay them for long periods of time in the hope that they go the wall and they can they hopefully then cut a deal with the liquidators and settle only a small percentage of what was originally owed.
This whole scenario is a very sorry state of affairs, so how can we resolve the issue and ensure your clients pay their accounts on time? Here are some simple tips that can be implemented easily to your business, will deliver results straight away & ensure that your cashflow remains intact –
1. Clearly set out your Payment Terms & Conditions
It’s extremely important to set out your company’s payment Terms & Conditions in writing. This can be including in your own Terms & Conditions on your contracts or credit application forms, but also stated on your invoices. It amazes me the amount of businesses who simply don’t have any payment Terms & Conditions, and if they do their clients are not aware of them as it has not been brought to their attention before. Debtors are very conscious of what they have to pay, but if this is not set out in black and white then the company has nothing to fall back on, should the debtor then start to query these. Setting out your Terms & Conditions in writing highlights them to your clients and creates a clear and consistent approach.
2. Reward Clients who pay on time or early
We always tell our clients a good customer is a paying customer. Research has proven that rewarding negative behaviour has little impact. Say you have an employee who is continuously scrutinised for making small errors. Your employee will feel under valued and their overall performance will suffer as a result of this. Whilst you would want the employee to improve and give feedback on where they have gone wrong, if this employee also receives positive feedback on areas they are strong at, they will continue to improve and demonstrate positive behaviour. You should try and reward clients who pay on time or early. For Example, you could give the client a discount off their invoice for paying early or on time or offer them a discount of their next order as long as they pay within the timescales set in your Terms & Conditions. This will make your clients feel special & valued by the business, which in turn will increase sales and turnover.
3. Send your invoices out with the goods or services
A lot of businesses we deal with raise invoices to their clients at the end of start of each month, by this time their client could have been in receipt of the goods or services they ordered for two to three weeks already before receiving an invoice from the company. This does not make good business sense, and invoices sent after at the end of each month etc are often paid late, and there is a stronger likelihood of them been settled quicker if they are in the client’s possession straight after the business transaction has happened. Sending invoices throughout the month and immediately after goods or services have been supplied is also beneficial because the company will have a constant flow of cash coming in to their account.
4. Don’t be afraid to approach and speak to your clients about payment
By law in the UK you have to allow clients 30 days to pay before you can pursue them legally for payment. However, this does not stop you calling or emailing them to ask when you can expect payment. Credit Control Departments should have a robust process in place for this. They can call clients straight after invoices have been raised to deal with any queries or disputes promptly, then call or email them 15 & 30 days after the invoice has been raised to see when payment will be made. No one likes pressing their clients for payment, but this demonstrates to clients that the business is very on the ball with their credit control. After 30 days contact should be made with the client on a daily basis, if this contact is not made it implies that the company doesn’t need the invoice paid all that urgently.
5. Make sure you have invested in the right IT Systems
There are a load of CRM databases and software to assist your business with cash flow and Credit Management, businesses need to ensure they invest in the right ones. Successful Credit Management is about having a clear overview and excellent processes in place to deal with your credit control. In order to streamline the sales to cash process it is very important to use the right software. Specialised Software is much more advanced than say an Excel Spreadsheet. Spreadsheets can contain a lot of data which can sometimes be incorrect due to data entry errors or changes in formulas, which can quickly lead to the wrong information being viewed. If you invest some cash into specific software for your cashflow, so you can say view late payers at the click of a button, then this will ensure you are on top and one step ahead of your clients for chasing payment.
All of the above are easily implemented into a business, with little fuss or cost, this could in turn lead to big changes within the business. Small modifications can lead to invoices being paid on time or more promptly, and in turn easies your cash flow and clients should return to buy more goods and services keeping everyone happy, including the King!