1) Avoid bad debts by being prepared
A Debt Collection Policy that all staff know and understand, should minimize overdue debt.
2) Get a signed contract
Set out payment terms in writing and obtain your customers acceptance of these terms with a signature BEFORE you supply goods or services. Your Contract, Terms of Trade, credit Policy doesn’t need to be a long and complex document.
3) Always conduct a credit check prior to the extension of credit
If you don’t know the legal name of the entity that you are trading with how can you possibly check their credit history. Furthermore, you won’t be able to invoice them correctly, and it won’t be easy to start legal action if you need to. See Why credit checks are worth doing.
4) Issue invoices promptly
Send invoices out the same day as goods / services are sent or delivered. Ensure that the invoice is addressed correctly – name, position and the right address. See Why invoicing immediately helps you to get paid quicker.
5) Monitor your accounts receivables on an ongoing basis
Establishing a process for assessing credit risk and determining credit limits is critical to managing Accounts Receivable and avoiding bad debt. Don’t rely solely on Shark Patrol’s Shark Check and Shark Watch to make these decisions.
A slow-paying customer can be worse than no customer at all. Once you figure in the time and energy you spend tracking and collecting their outstanding invoices, these delinquent customers may be actually costing you more money than they’re worth. Cut them loose.
6) Gradually escalate pressure on your debtors
It’s a fact: The longer you wait, the less money you’ll collect. Begin your collections procedure as soon as you notice a delay in payment.
7) Be prepared to address individual circumstances
If a good customer is occasionally late with a payment, be flexible. Do continue to call them to request payment, and set up a payment plan if necessary.
8) Chase overdue accounts immediately
Start calling customers the day their invoice becomes past due, and call them every day until the bill is paid. Most people will pay persistent creditors first.
9) Cease the extension of credit on overdue accounts
Your credit policy (which the customer should have a copy of) sets out the conditions and penalties in respect of every invoice raised. Close, suspend, whatever you call it, but Stop supplying goods or services to a customer who is not paying.
10) Never be afraid to ask for help
The only good customer is a paying customer, and if you don’t ask, you might not get – so don’t be afraid to ask for payment