MJEvery business relies on cash flow to survive. It matters not whether you have the best prices, products and/or customer service: if you don’t learn how to properly maintain cash flow, your business will eventually fail. By taking a proactive approach to debtor control you can improve your business’s cash flow and enhance its profitability.

Preventing Bad Debts

Ensure you manage the risk of bad debts by implementing a clear payment and credit policy. Consider:

  1. Performing a credit check on potential debtors:-
    1. Consider having them sign a credit application form or credit agreement
    2. Conduct a pre-credit data check or/and ask for trade references
  2. Setting clear payment terms:-
    1. e.g. payment within 7 or 14 days from the invoice date.
      1. Try to set payment terms shorter than your supplier’s terms as this will also assist with cash flow.
    2. Ask for payment on delivery initially until your business relationship is stronger
  3. Making it easy for people to pay you:-
    1. Offer credit card or EFTPOS and train staff to accept payment

Maintaining Your Payment and Credit Policy

It is important to be CONSISTENT in applying your payment and credit policy. This will help you to recover your outstanding debt whilst maintaining a good relationship with your customers.

  1. Train staff as to the when and how’s of following up on outstanding debts
  2. Ensure you act promptly and consistently to follow-up on any outstanding or owing payments by:
    1. contacting your debtors quickly with regard to any overdue invoices e.g. when payment is 7 days overdue
    2. Chasing overdue payments by sending clearly marked statements, reminders or final notices
    3. phoning the debtor and asking them if there is an issue
      1. If there is an issue try to arrange a payment plan that would suit you both
  3. In the event payment is still outstanding consider reviewing your credit terms for that customer e.g. payment on delivery

Recovering Outstanding Debts

If payment remains outstanding you might consider using mediation to help resolve your issue. This can save time and your matter might be settled in a way that suits both you and your client/customer. A magistrate can always make the final decision if no agreement is reached.

The dispute resolution team at Everingham Solomons can assist you at every stage of the debt recovery process. They will work with you to find the appropriate course of action and help devise strategies suited to your circumstances to ensure outstanding debts are recovered as quickly and cost-effectively as possible.

Can your business afford to wait?

At Everingham Solomons, we have the expertise and experience to assist you because Helping You is Our Business.