How to get paid on time
This article provides advice on how to implement a good credit policy for ensuring that you get paid on time and explains how to deal with excuses for late payment.
Few companies can hope to trade today without offering some kind of credit to their customers. There is always a risk in effectively lending money, one is the risk of bad debt and the other is late payment or the “slow payer” which can have a detrimental effect on your company’s cash flow. In some cases slow payers can have disastrous effects.
All organisations however large or small should have a credit policy which complements any documented Terms and Conditions. The credit policy provides internal and external controls to ensure that selling and collecting on credit are handled efficiently.
Reducing Slow Payers
Having a credit plan in place can help you to reduce the number of slow payers you have. These are the key elements of your credit plan:
1. Know your customer
Obtain if possible, credit reports for new customers before offering credit terms
2. Set a credit limit
Set cautious limits for new customers and wherever possible obtain cash in advance on first orders. If you need to offer credit ensure that you ask a new customer to sign a delivery note, so that they cannot claim to have not received any goods.
3. Invoice Promptly
Issue invoices as soon as an order is complete
Issue monthly statements and telephone overdue debtors.
5. Obtain Names
When chasing overdue accounts always obtain the name of the person who has authority to promise payment.
6. Be Prepared6
Make sure that you have all of the facts before calling a debtor including checking how many copies of invoices have been sent.
7. Making the call
Speak clearly and give your name, company and amount involved, control the conversation and get a firm commitment to payment.
8. Keep records
Keep accurate notes of all telephone calls and confirm if necessary in writing or by fax.
9. Be prepared to compromise
If there is a cashflow problem with your customer be prepared to accept payment on account at regular and agreed stages.
10. Take legal action
Be prepared to sue your debtor if all else fails. They are NOT a good customer if they don’t pay you.
Debtors have been responsible for great works of fiction in recent years.
Here’s how to deal with some of the most common:
“We only pay on statement and you have not sent us one”
Send a copy statement by fax immediately
“We have not received your invoice”
Fax duplicates and diary forward for seven days to chase for payment.
“Invoice is in dispute”
Do not let this become an excuse for not paying. Request details of when the dispute was first notified to your office, if possible try to deal with the dispute there and then on the telephone.
“We are currently awaiting funds from a large customer and can only pay you when these are received”
Obtain the name of your customer’s debtor, the amount that is owed and the expected date for payment. Insist on remittance by return.
“We are changing banks and have no access to funds”
Explain to the customer that you are willing to accept a manually prepared cheque or a bank draft from their new bank
“Our cheque signatories are all out of the office”
Find out the names and when they are back. Diary forward and call again when the cheque signatories are in.
“The cheques in the post”
We’ve all heard it before. Accept that post can take 3 working days and then get on with the business of collecting your money.
For further information, please contact us on 03332 401 333 or email firstname.lastname@example.org