For businesses, waiting long periods to collect receivables and dealing with Customers who pay late is an unfortunate part of business life.
Having a good system in place to help manage this is possible. With the right policies in place to deal with these issues early, you can help to improve your cashflow.
Dealing with Bad Debt
Late or unpaid invoices can really affect the efficiency of your business if they aren’t dealt with in a timely manner. Late payments reduce your available working capital, the money you use and need for your everyday operations. All business owners understand this is something you need to avoid.
Avoiding Bad Debt
As a small to medium sized business, there are several measures you can take to help ensure faster payment, collect late payments and avoid bad debts. In order to avoid bad debt, you can:
- Make sure the payment information is printed clearly on your invoice including the due date and how you expect to be paid.
- Send your invoices as soon as the product or service is provided to avoid contributing to any potential delay.
- Send the invoice to the person directly in charge of making payments and maintain a good working relationship and open communication channels with them.
- Send monthly statements, follow up with regular reminders and have a solid policy for your business to deal with late payments and bad debts and stick with it.
Collecting Bad Debt
Doing your best to avoid bad debt and increase the probability of early or on time payment is one thing, knowing how to collect bad debts is another:
- Communicate with your customer in a friendly and professional manner. There’s no need to harass them and you may be surprised how accommodating they are.
- Try and find out the main reason why they haven’t paid & come up with a mutual solution.
- Keep a record of contact and all communication with your debtor in case you need to take legal action.
- Try negotiating with your debtor and see if they can make some part payments if they are struggling.
- Write non-threatening letters of demand, clearly outlining the debt and past communications in a professional manner referencing harsher action.
At AddCash we understand the difficulties of doing business and how late payments and bad debt can have a negative impact on your operation. For information relating to our invoice finance and debtor finance facilities give us a call and see how we can help your business.