Debt Collection - Business Victoria Breakfast

How to make your customers

Jason Cunningham

pay on time

(C) Jason Cunningham 2013

“…make them pay…” (C) Jason Cunningham 2013

Proclaimer

(I mean disclaimer – I always get them

confused…)

This information is for illustrative purposes only and does NOT constitute advice.

Always speak to your accountant or business adviser about your specific situation before making a decision regarding how to improve your business.

(C) Jason Cunningham 2013

(C) Jason Cunningham 2013

Importance of cash flow

The lifeblood of all businesses

When you’re making money, all other stresses are manageable

So you get paid!

(C) Jason Cunningham 2013

Lack of communication at start of relationship / engagement

No debtors process in place

Only act once there’s a problem – often too late

(C) Jason Cunningham 2013

Preventative measures

Engagement Authority Build into your process for dealing with clients

Set up a debtors policy and process “Just following the process…”

(C) Jason Cunningham 2013

8 ways to make them pay

fifocapital.com.au (C) Jason Cunningham 2013

1. Send your invoice on time (same day)

(C) Jason Cunningham 2013

1. Send your invoice on time (same day)

One of the first things that needs to be done is to get your invoice to the customer quickly or on time. Without an invoice you can’t get paid - so, don't wait to do this. On Time: Send your invoice out the day the work has been done or goods delivered to your customer.

(C) Jason Cunningham 2013

2. Clearly state your terms on the invoice

(C) Jason Cunningham 2013

2. Clearly state your terms on the invoice

On Terms: Your invoice needs to include the due date, as detailed in your agreed terms of trade. For example, if the agreed terms are 30 days, then, state “30 days” plus insert the actual due date it needs to be paid. Remember, if you don’t have a formal trade agreement with your customer, then you’re leaving on-time payments to chance.

(C) Jason Cunningham 2013

3. Get your invoice right (C) Jason Cunningham 2013

3. Get your invoice right

All invoices need to follow the ATO’s standard invoice rules to ensure it is valid, plus other information to make paying the invoice simple for your customers. Such as; • It must say, “Tax Invoice” •Payment due date •Purchase order numbers •How to pay e.g. your correct bank account details or

how to pay by cheque incl. name and mailing address.

(C) Jason Cunningham 2013

4. Incentives to pay early (C) Jason Cunningham 2013

4. Incentives to pay early

Offering your customers a percentage discount for paying early can often motivate customers to pay early (or at least on time).

But, offer early payment discounts with caution as quite often customers will start to pay outside of terms but still expect the discount.

If you choose to consider discounts, consider building it into your margins.

(C) Jason Cunningham 2013

Follow up invoices the moment they become overdue

Moose Rocco

5. (C) Jason Cunningham 2013

5. Follow up invoices the moment they become overdue

Always follow-up invoices the moment they become overdue. SHOWS YOU MEAN BUSINESS. Have pre-set customer contact time(s) – for example, if the invoice is 3 days late, phone the customer on the 4th day. Repeat this step every 5 days until the payment is received.

Set-up automated “Overdue Invoice” statements or letters using red ink in the heading. When contacting the customer, remember your relationship remains critical, so conduct these calls in a friendly and courteous manner. More often than not, they’ll feel embarrassed and be apologetic.

If it is a new customer, contact their accounts payable person 3 days prior to the first invoice batch due date as a “friendly call to see if all is OK for payment?”.

(C) Jason Cunningham 2013

6. Escalate to your key contact (C) Jason Cunningham 2013

6. Escalate to your key contact

If the invoice is well overdue, say, over 21-28 days, always look to escalate your query to your key customer relationship point. Once again, the conversation should be friendly and courteous. Don't be embarrassed to make the call. It's business. If, however, there appears to be a broader issue around the invoice non-payment, then quite often professional assistance can be the best form of recovery. Such action should be considered carefully but always acted upon in a timely manner - don't let it go on too long as the longer you leave it, the harder it will become to get paid.

(C) Jason Cunningham 2013

7. Alternatives for slow payers

Fifo Capital (www.fifocapital.com.au) Cash flow solutions: Debtor financing / debt factoring

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8. Get help: Business Victoria online tools

www.business.vic.gov.au

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Thanks…

www.thepractice.com.au

@jasecunningham

[email protected]

Email [email protected]

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(C) Jason Cunningham 2013