Business Library

Get paid more promptly

It is essential for the survival of your business to ensure that you get paid as quickly as possible, so you should make a sound credit management strategy a cornerstone of your business.

One of the best ways to ensure that your customers pay promptly is to develop a close relationship with them. Find out which customers are most valuable to you and which are most creditworthy; then try to develop as much business with them as possible. Make sure that you investigate any prospective customers before doing business with them to avoid bad payers.

When dealing with a customer, make your payment terms very clear from the outset. Discussing payment terms should not put off a prospective customer. It is better to establish the parameters for your business relationship upfront rather than risk confusion later. Keep the contact name and details of the person who will actually process any invoice for payment, as well as the name of the person who places the initial order. This will save you from being passed around the company if you have to chase late payment.

Payment terms

When it comes to invoicing customers, make sure that you issue accurate invoices promptly. It is also a good idea to print your payment terms clearly on all invoices. You could consider offering incentives for early payment, typically a percentage discount on the value of the order. This is particularly useful at the end of months if you are short on your target.

If your customer fails to pay within the period specified, remember to chase immediately. You could telephone major accounts in advance of due dates to ensure that payments are being processed. When chasing payment, always keep a record of every contact made with the customer. It is best to communicate in writing, ideally by fax or email for speed. Although you should remain courteous when chasing, it is important to keep up the pressure and maintain regular contact. If your persistence is not being rewarded, it is worth considering employing the services of a debt collection service, which will chase the debt for you and usually charge a percentage of the money recovered.

Action Checklist:

Identify your most valuable customers
Decide on your standard payment terms and communicate them to your customers
Devise a timetable for following up late payment
Sign up to the Better Payment Practice Code and practice what you preach

Many small businesses use a Factoring Service to handle invoice management and to credit check new customers - get a no obligation quote on a Factor here.

A debt collection agency will handle efficient collection in a professional manner - click here for a debt collection quote.

This is a guide. It may be helpful for you to speak to an advisor in debt collection and factoring. E&OE