How to ensure you get paid on time
It’s tough times, right? Everyone is in the same boat. There is not one business that hasn’t been affected in some way by the implications of Covid-19. Funds are not flowing as well as they were prior to March 2020 when the country went into complete lockdown for over a month. And as much as recovery was coming along nicely, the second lockdown has had even further devastating effects for a lot of businesses throughout the country.
So how do you ensure you get paid on time for the goods or services you have provided on credit?
- The first step is to ensure you have very clear expectations set prior to doing any work for anyone. A signed agreement with terms of trade stating payment terms is best practice, as this means you have agreement on when payment will be made.
- Sending invoices out promptly for completed work or at agreed times during (progress invoices) will help keep the funds flowing.
- Following up on invoices that are not paid within the agreed time frames is the key to the success of collecting payments. A day or two after the invoice is due, send a reminder that payment has not been received and now overdue, as per your terms of trade. If not paid within a couple of day, pick up the phone and have a conversation with the client, reminding them of the agreed terms of payment. At this time using empathy not sympathy is key to getting conceptual agreement while on the phone of when payment will be made.
- If payment is not made as agreed, rinse and repeat by getting straight back on the phone with the client to ask why.
- You may end up with an agreement for the debtor to pay off the debt over a period of time if they have genuine reasons for not being able to pay. This of course is up to you. If they don’t stick to the agreed plan, the go back to step 4.
- If there are repeated promises with no follow through, they you may need to consider debt collection. If you have a signed terms of trade as per step 1, which as a clause about any debt collection costs being payable by the debtor, then those costs will be added to the debt and collected by a professional debt collector.
The squeaky wheel gets the oil
Now I know that sometimes it can feel uncomfortable to discuss collection of money owed to you with your clients. The fact is, they asked for this work to be done, or for the products purchased, therefore they owe you this money. You have provided a service to them at an agreed rate. It’s ok to ask them for payment. The team at Ontrack Bookkeeping can help support and guide you with this process, or if you choose to outsource that function, we can do it for you. Get in touch today to find out how.
For formal debt collection, we use and highly recommend Specialist Collections and Consultants in NZ. Shane and his team are great to deal with and go above and beyond to ensure those debts are collected on your behalf.