There’s nothing worse than doing work, only to find yourself faced with a customer who simply cannot pay. Good credit control is essential. Here are a few basic pointers to reducing the chance of a bad debt.
Agree terms upfront
Make a point of agreeing with your customer when and how payment is due. If your terms are 30 days, your customer should be aware that they will not be expected to take 60 or 90 days to pay. A credit check on a new business customer can also be a good idea.
Be sure to invoice on time and issue regular statements to customers who owe you money. If you give this task prompt attention, your customers are more likely to pay you promptly.
Offer a variety of payment methods
Cash, cheques, credit or debit cards, BACs, PayPal, online transfers or standing orders. The more ways available the less excuse someone has to not pay you.
Have a plan and stick to it
If in spite of your best efforts, you end up with money owed to you, devise a strategy for chasing payment. For example, you could contact your customer when the payment is 2 weeks late and every 2 weeks thereafter until you obtain satisfaction.
Write to them
Request payments by a set date in a friendly but formal manner.
Speaking to your debtor in person gets better results than writing letters. If your customer tells you there is a problem in making the payment, in these difficult times it often pays to be a little bit flexible. A customer who is paying their bill in instalments is far better than one who isn’t paying anything at all. So be prepared to accept stage payments if someone is in difficulty.
Record your dealings
Record the date and outcome of all debt chase contacts and remind your customer of any failed promises. It reinforces your intention to be paid.
No matter how frustrated or angry you get, keep the tone friendly. Losing your temper closes the door to negotiation and any potential future trade. If you can’t do this, get someone else to make the call for you.
Threaten legal action
When all else fails, consider threatening to place the debt with a debt collector or to raise a County Court Summons. No-one likes a debt collector calling on them, and a CCJ against them can have serious consequences! These measures are only effective against people who have something to lose.
Stephen Hill Partnership specialises in helping small businesses. Call us today to arrange a free consultation. Download our useful App.