Cash Flow and Debt Recovery
Cah Flow is King: How Efficient Credit Control and Debt Collection Can Help
No matter what your sector, business cash flow remains a crucial element of the structure of your organisation. It is essential for being able to reinvest in your business at the right time and to be able to take advantage of new markets and opportunities.
Unfortunately, the economic turbulence of the last 15 years, from the banking crash to the coronavirus pandemic, have increased the frequency of late payments. Delayed payment of debt can be hugely damaging to any business, and dealing with it has to be a high priority. Fortunately, there are steps that you can take to preserve your cash flow and limit the harm caused by late payments.
Make your Payment Terms and Conditions Clear
This is an essential first step in limiting the harm of late payments. Make sure that you set out your terms and conditions clearly and early on, both on your contracts and your invoices. By setting these out early, you are building this aspect of your customer relationship on firm foundations, making it clear what the customer’s obligations are, and how you will handle any late payments.
Reward Early and On-Time Payments
A good customer is one who pays on time. It is well known in psychology that rewarding good behaviour is far more effective than rewarding bad behaviour. Consider measures to reward customers who pay on time or early, such as discounts or other incentives. This can also help to strengthen the link between you and your customers, leading to more sales in future.
Send Invoices with Goods
Some businesses are in the habit of raising invoices on a monthly basis, which means a customer may already have received the goods or services before receiving their invoices. This is poor practice. It is far more effective to ensure that the customer has the invoice at the time of receiving the goods, or immediately after. This also helps to promote more consistent cash flow.
Be Prepared to Talk
Even if the invoice is not yet due for payment, it is never a bad idea to send pre- due date friendly communications to a client to ask about when payment will be made. A Credit Control team should have a clear process in place for this, perhaps contacting the customer 15 and then 30 days after the invoice has been raised, just to check that all is well and that payment of the invoice can be expected on the due date. This makes it clear to the customer that your business is on top of things and that prompt payment is important to you and that you won’t let it drift.
Work with a Debt Recovery Agency
One of the most effective ways of improving your cash flow through tackling late payment is to partner with a modern, reputable debt recovery agency. A professional debt collection agency will usually operate on a no collection no fee basis, and will utilise the latest methods and tools to secure payments, whilst maintaining good customer relations. Using a debt recovery agency also frees you up to focus on running your business, saving you money, time and hassle, while helping to ensure that your cash flow issues are minimised.