Do you have difficulty with unpaid invoices? There are three main reasons for your customer not paying you within your payment terms:
- Debtor is unable to pay
- Debtor is unwilling to pay
- Debtor disputing your account
Once the reason for default is identified you will be in a more informed position to decide on a strategy to motivate payment.
The average debt amount can vary considerably, depending upon the industry. What is classed as small irrelevant debt to some businesses can be the lifeblood of other businesses.
Your success in recovering money owed to you is reliant upon your collection cycle and credit policy.
One very important point is the age of the debt. As the debt becomes older the probability of recovery diminishes significantly. So having a credit cycle strategy defining timelines and processes can greatly increase the recovery success.
It’s important to develop a credit cycle strategy to maximise invoices being paid. Some companies have an online platform offering an option to monitor active cases and give instructions on collection at a time and place that suits you. Make sure the platform was designed to meet the requirements of small- to medium-size business owners.
‘Maintaining effective cashflow can be daunting, but is the lifeblood of all SMEs,’ says Terry Kemp, KPR General Manager. ‘During my extensive time in the debt-collection industry I have found that many business owners are experts in their profession, however they don’t have the skills, time or revenue to effectively collect overdue accounts.’
Cashflow is important for small-business owners, but so are your customers. It’s important to know how to approach your customers and recover your funds in a way that won’t end your business relationship. Business owners need tools to manage their risk of debt and recover overdue accounts in a timely and cost-effective manner.
When you are looking for a specialist, make sure they do all their debt collection and legal work in-house, which means you’re dealing with specialists in the field and you’re all on the same page. Remember to check: if they don’t collect you don’t pay a commission.
Kemps Petersons Receivables, www.kempspetersons.com.au
