Having an efficient and effective debt collection process in place in vital to ensure your business’ cash flow remains healthy. There are a number of recommendations ACCC and ASIC have made to help business owners remedy any debt collection issues. There are also a number of steps you should take to deal with delinquent debtors to ensure they don’t impact the future growth of your business.

  1. Make it easy

If you’re still expecting customers to pay their bill by cheque, you’re asking for delays in payment as it usually take a few days for them to clear. Instead, you should be giving customers the option to pay by all of the major credit cards, direct deposit into your account, even look at BPay and Paypal. By making it easy for people to pay you increase the likelihood of them finalising your invoice in a timely manner. Consider breaking a large bill into smaller, easier-to-pay amounts with a payment plan. Offering a discount to people who pay early is also an effective strategy. Any one of these techniques should help ensure most people pay their bills promptly.

  1. Next steps

If you’ve offered multiple payment options and incentives to pay on time and your customer still hasn’t settled their account, it’s time to take look at other strategies. However, before deciding to ‘send in the heavies’, there are a few steps you can take to move things along. Start by sending a friendly reminder to your customers stating they are late and reminding them of your payment terms. They may have a good reason for being late such as losing track of the due date or paying into the wrong bank account. Put any reminders in writing so you have a record of contact in case any disputes arise. However, that doesn’t mean you shouldn’t also pick up the telephone this can help maintain your relationship and may help facilitate prompt payment.

  1. Last resorts

If you have tried contacting your customer numerous times using various means and had no response or you’ve been fobbed off, it may be time to consider sending a formal letter of demand. This document is more formal than your previous reminders and is a good indication to your customer that you are serious about getting the funds you are owed. There are a number of templates online that you can use or you may prefer to ask your lawyer to draft one for you. Include all of the relevant facts including payment terms and copies of any previous correspondence. Send the letter by registered post and request a ‘signed proof of deliver’ card in case you need to take the matter further. It’s always best to send the letter of demand to the business owner rather than the accounts department which may have been where you sent the original invoices. If this still doesn’t elicit a response, you may need to consider legal action so contact your lawyer for further advice.

While chasing people for money is never pleasant, you can’t run your business properly if you aren’t being paid. Taking these steps will help ensure you don’t end up with cash flow problems. If you need help with forecasting your cash flow, get in touch to see how we can assist.