Sales can help you forecast how much your business will make over the next few months …
But the reality is …
If invoices aren’t paid, the deal isn’t sealed.
At the end of the day – Cash is King….
As business owners, we usually have several different kinds of Customers;
The Good Ones, the Bad Ones and the Ugly Ones.
This blog looks at what the SME Owner could do to categorise their customers and build in basic Risk Criteria
… enabling them to establish better ways of getting their debts paid.
The following looks at each category and what it might mean for those Outstanding Invoices:
>30 Days
Generally, if your standard terms are 14 or 30 Days, these invoices are 30 days past the Invoice Due Date.
So, what would you do to get that debt or unpaid Invoice in quicker?
At this stage, chasing these Invoices is known as soft chasing.
Soft chasing may include:
- A Courtesy Email to the Client/Customer to clarify that they have received the Invoice in question, that their Standard Terms have expired, and that payment is now due.
- A Follow Up Call
- Maybe a Follow-Up Email to say that you are looking for a Payment Date.
>60 Days
So, you’ve tried all the above, but your efforts haven’t yielded a positive response.
Here are your next steps:
- Try all of the above again, but ramp up the pressure x2 or x3 depending on your industry and the problem Customer
- Think about adding in Late Payment Interest and Charges
- Have more meaningful Communications with those who can provide a bit of assistance in getting these Issues solved.
>90 Days
When an Invoice gets to 90 Days+, they tend to become harder to collect, as they usually carry a dispute or a Customer Product/Service Issue that needs solving.
These items need substantive analysis to understand where you are and where you want to go.
- Better, closer contact negotiation may be needed.
- Understand the Problem and/or issue that may arise – offer another way of Dispute Resolution.
- Think about issuing Final Demands/Letters Before Action.
- Seek the help and advice of third-party Debt Collection Agents or Debt Strategists who can help you plan out a framework and identify key issues you may face in your industry/sector.