Are your debtors crippling your cash flow?
Are you struggling with chasing payments in from your customers?
Could you minimise the risk of bad debts by collecting debt earlier?
Why not standardise your procedures and follow our simple step by step guide below to debt collecting?
Note: We at K A Farr & Co. have applied these principles & reduced our debt by 50%.
Step 1: Reduce Terms & Review
- Stop sending end of month statements
- Decide on your terms, eg Cash on delivery (COD), 14 or 30 days,
- Remember – if a customer is worried about terms, they are usually NOT worried about when they have to pay rather how they are going to pay. If this is the case aren’t they a bad credit risk?
Step 2: Choose the Team Member Responsible – Not You!
- Separating the debt collection process from the business owner achieves better results and frees up your time to work on your business
Step 3: Have a Clear “Aged Debt” Report
- Any good accounting software will have this function, or create your own simple spreadsheet (Excel)
- This report will show the accounts overdue and by how much.
Step 4: Be Prepared
- Have all the info you need, amounts, invoice numbers etc
- Make detailed notes of any conversations and promises (names, dates, times, what was promised etc.).
Step 5: Set Your Rules
- Know exactly what to say:
- Develop a script for each call
- Develop a standard letter for sending after 3 calls
Step 6: Set the Tone
- Use the “3 F’s” – Firm, Fair & Friendly
- Don’t get into an emotional argument – stick to the facts.
Step 7: Follow the Contact Schedule
- Consistency of contact is the key
- Do what you promise
Step 8: Don’t Avoid the Problem
- Get on with it
- Remember under contract law, at the time of sale they have agreed to pay for your product or service on the terms you specified. If they haven’t they have broken the contract.
Step 9: Review
- Regularly review the call sheets & meet with your team to identify businesses that are habitual bad payers.
- Put them on COD (At least reduce their terms).
- Choose not to deal with them.
So go ahead, try implementing this today and you too could reduce your debt & improve your cash flow overnight – it really is that easy!
For more information or to discuss this in more detail call us on 01704 211434 or email firstname.lastname@example.org