For businesses, waiting long periods for receivables and dealing with Customers who pay late are an unfortunate part of business life. Having a good system in place to help manage this is possible. With the right policies in place to deal with these issues early, you can help to increase your cash flow and grow your business.
Dealing with Bad Debt
Late or unpaid invoices can really affect the efficiency of your business if they aren’t dealt with in a timely manner. Late payments not only affect your working capital, they can also have a negative impact on your turnover, credit rating and even the future viability of your business.
Avoiding Bad Debt
As as small to medium sized business, there are a number of measures you can take to help ensure faster payment, collect late payments and avoid bad debts. In order to avoid bad debt you can:
- Make sure the payment date is printed clearly on your invoice to ensure its part of the customer’s billing cycle.
- Send your invoices as soon as the product or service is provided, to make sure they are paid promptly.
- Send the invoice to the person directly in charge of making payments and maintain a good working relationship and open communication channels with them.
- Have a solid policy for your business to deal with late payments and bad debts and stick with it.
Collecting Bad Debt
Doing your best to avoid bad debt and increase the probability of early or on time payment is one thing, knowing How to Collect Bad Debts is another:
- Communicate with your customer in a friendly and professional manner. There’s no need to harass them and you may be surprised how accommodating they are.
- Try and find out the main reason why they haven’t paid & come up with a mutual solution.
- Keep a record of contact and all communication with your debtor in case you need to take legal action.
- Try negotiating with your debtor and see if they can make some part payments if they are struggling.
- Write non-threatening letters of demand, clearly outlining the debt and past communications in a professional manner referencing harsher action.
At AddCash we understand the difficulties of doing business and how late payments and bad debt can have a negative impact on your operation. For information relating to our invoice finance and debtor finace facilities give us a call and see how we can help your business.