Show me the money! How to get clients to pay you faster.

DO YOU HAVE A SYSTEM FOR CHASING OUTSTANDING CUSTOMER ACCOUNTS?

One of the key drivers to business success is cashflow management – this includes not only managing what cash is going out and when but also what’s owed to you.

Unless you are one of the few businesses who don’t carry customer accounts, then outstanding customer accounts are probably a major cashflow drain on your business.  If they are not managed properly this can get out of hand very quickly and we’ve seen this leading to panic stations in a business.


What do I need to do to improve my outstanding accounts?

  • Have a documented procedure for consistently reviewing and following up outstanding customer accounts.

If you make it a process – write a step-by-step procedure, schedule it and delegate it to a team member then it will get done just like any other regular task in your business (it shouldn’t be relying on you to prompt it or for someone to get around to it).

We hear that a lot of businesses feel uncomfortable chasing money – if you have a procedure then it just becomes a “thing” that’s regularly done as a matter of course in your business taking some of the potential “yuk” factor out of chasing people for money.

  • Create templates of standard wording that you would like your team member to use at each step.

The easier and quicker it is for your team member to do each week the better.  Draft up suggested wording (or even better ask your team member to create it and you check it) then ask them to create it as a template that can be easily used each time without fail – if you use Outlook for your emails here’s how to create Templates.

  • Look at how you can automate your process – see the bottom of our article for tips on this.

A sample process that you can start using in your business today

  • Two days prior to due date – Email or text reminder (could use this for larger invoices only – thank you to one of our amazing clients for this suggestion!)

Good Morning Bill,

This is a friendly reminder that your invoice with us for $xx is due on xx/xx. 

We kindly ask that you make payment by the due date. 

Attached is a copy of your invoice which includes our payment options.  You can also pay via our website (insert link here).

If you’re unable to pay our invoice by the due date, please get in touch with (insert team member’s name) at the office on 07xx xxx xxx.

  • Two days post due date – Email or text reminding your customer that the invoice is now overdue and ask for payment by xx/xx/xx

Good Morning Bill,

Your invoice for $xx was due on xx/xx and is now overdue. 

We understand that you may have accidentally overlooked our invoice. 

Can you please ensure payment in full by this Friday xx/xx?

Attached is a copy of your invoice which includes our payment options.  You can also pay via our website (insert link here)

If you need to talk with us about payment, please get in touch with (insert team member’s name) at the office on 07xx xxx xxx.

 

You will probably find that most clients will pay within the first two steps but if not:

  • 1 week (or max 2 weeks) overdue – phone call to discuss that invoice is overdue, ask if there are any concerns with the account and ask for a date when you can expect payment. If customer is unable to pay be prepared to work with them to solve problems – talk about payment terms (like $xx per week for next four weeks)

We recommend writing down and practicing some scripts with your team member who makes these calls so they have the right words on hand and importantly can make decisions on the fly when discussing the outstanding accounts with your clients.

  • Two days before date of agreed payment – Email or text reminder re-affirming discussion and payment date

Good Morning Bill,

As per our recent phone call with you, this is a friendly reminder that we are expecting payment of your invoice for $xx on xx/xx.

We thank you in anticipation of your payment. 

If you are unable to make the expected payment please get in touch with (insert team member’s name) at the office on 07xx xxx xxx.

Attached is a copy of your invoice which includes our payment options.  You can also pay via our website (insert link here)

  • If still unpaid another phone call is warranted to work through it with your customer
  • Refer to step 4
  • Unfortunately if the outstanding account can’t be resolved you may need to refer the matter to a debt collector.

 

Other tips to improve customer accounts

  • Running customer accounts is not only a cashflow drain but is time consuming for your admin team. Look at ways to reduce outstanding customer accounts in the first place:
    • Consider taking deposits or payment in full before starting a project or job
    • Set a minimum customer account level e.g. any purchase less than $xx can’t be put on account and must be paid at time of sale
    • Offer different payment options to make collecting customer payments at the time of sale easier (think mobile card readers)
    • Re-affirm this with your front line team
  • The reason we suggest using text messages is they are currently the most read medium available – let’s face it most of us are never far from our phones these days.
  • Persist with the system – you will find that the more consistent you are with your customers the better your outstanding accounts will become over time.
  • Make sure you are sending statements each month as well.
  • Have a regular (say monthly) meeting with your team member to coach your team member to help them succeed, review the outstanding customer accounts list and sort out any problems.  We’ve all seen problems where a client hasn’t paid because there is something outstanding that needs resolving by the technical or sales team.  Open and regular communication with your team and customer is the key so you can jump on any problems early.
  • Be prepared to make a call ceasing extending further credit for the client. It’s not good for you or your customer to get further and further behind without having an open conversation about it.  We’ve seen businesses that have been set back months or even years when a large account has turned into a bad debt.    Don’t let it get that bad!
  • Offering different payment options (BPAY, Direct credit, credit card, direct debit) and having these really visible on your invoice or in your emails is another important factor for managing customer accounts effectively.
  • Your invoices need to clearly state your payment terms and due date
  • Overall, the trick, well there isn’t a trick really – it’s all about consistency and timeliness. The earlier you can sort a problem, making sure your customers understand your payment expectations and then work with your customer to resolve any problems, the better.

 

This sounds like a lot of work.  Can I automate this? 

YES!!! Much of this process can now be automated in your bookkeeping software so if you haven’t enacted this functionality, talk to your bookkeeper or us about how to make this more efficient.

Good management of your outstanding customer accounts is a critical part in managing your business cashflow.  Businesses that have this “under control” have more regular and consistent cashflow leading to less stress for the business owner.  Not only that, they are more resilient and are better placed to grow and increase profits.  We love to see businesses overhaul their cashflow and reap the rewards, so if we can help in any way just say the word.

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