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Chase your debtors but keep relationships strong
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Chase your debtors but keep relationships strong
A "squeaky wheel" approach and reminding clients early can help recruiters avoid the common problem of overdue invoices, without resorting to actions that can harm their client relationships, says AL Business Advisors managing director, Mark Alley.
There`s nothing wrong with reminding clients about invoice payments before they`re due, he says.
"It depends what your terms of trade are, but assuming they`re 30-day monthly accounts, then especially in this market, it`s good even halfway through the month to call clients up to make sure they`ve got the invoice and there`s no issues with it."
Sometimes, he says, businesses wait 30 or 60 days before calling a client who then points out an error on the invoice and asks for it to be re-sent.
"And then of course the clock starts ticking again. You don`t want to wait that long, so… perhaps in the middle of the month or the third week at the latest, give them a call and check that it`s all in order and will be paid within the normal cycle."
And don`t stop there, Alley says. "A week later give them another call and say `I understand this is going to be paid next week`, just to make sure there`s no issues and problems, and perhaps even on that week give them another call and say `I understand this should be going through tomorrow`, and mention you`ve got some payments to make.
"It`s the `squeaky wheel` [theory] - if you keep ringing up and pestering, eventually you`ll get it, and hopefully you`ll get it in your 30 or 35 or 40 days, not 60 or 65."
Next steps
When the due date comes and goes but the invoice remains unpaid, the next steps you take depend on your relationship with the client, and how much you value their ongoing business, Alley says.
The first step should always be to call the client and remind them the payment is required. If an accounts person keeps ringing and getting nowhere, the job should "move up the line", Alley says, to someone who has a relationship with the client.
"A lot of people are struggling with cashflow," he says, "so if that`s the case it`s better to find that out and maybe do a deal with them. The option might be to say `can you pay some of it?` - so maybe they pay 80 per cent when it`s due and you can agree to defer 20 per cent for 30 or 60 days, so at least you`ve got some money in.
"I think the best thing is to work with the customer or the client so you keep the good relationship, and really only after perhaps 60 or so days then you`d perhaps give it to a debt collector and start that process off so it`s out of your hands."
Debt collectors, he says, will charge an amount to chase the payment for you, but he warns against engaging them if you have a good relationship with the client. "You wouldn`t want to do that too soon, or threaten legal action; all those sorts of things you can do later on."
Debt collector alternatives
One alternative to engaging debt collectors is invoice discounting or factoring, Alley points out, but not many small businesses seem to know about it.
Factoring effectively involves "selling" your invoices to a financial institution or a bank, and they typically pay you about 80 per cent of the balance owing upfront. "Usually anything over 90 days they won`t include," he says, "but if it`s fairly current they`ll pay you that amount of money."
You can continue chasing up the payment yourself, he says, or you can let the bank or other institution do the chasing. "Most people like to do the chasing themselves because it`s [better for] relationships, [or] you lose the business. [The institution will] charge you a fee - maybe 2% of your debtor`s balance - but it`s better than not having the money and possibly having an overdraft and things like that."
Recruiters who want to explore this option should contact their bank manager to be put in touch with the relevant department. The bank will assess the business and provide a costing for free, Alley says, "so you can then decide what you want to do, and go to someone else if you like".
Get to know your bank manager
Every small business owner should know who their bank manager is and meet with them regularly, Alley says.
"Even if you don`t have any overdrafts or borrowing facilities it`s worthwhile, but especially if you have a loan or overdraft you need to be in constant contact. Then if for some reason the overdraft keeps increasing, if you keep your bank informed upfront it`s much easier.
"Give them a phone call every month or maybe have a catch-up every month, or two or three, depending on how much business you`re doing. Banks usually have a formal meeting on a regular basis if you`ve got a loan, but you don`t want to wait until that situation.
"You want to liaise with them, and then if you do need some money - like in a situation where your debtors aren`t paying - then maybe you can get an overdraft or increase your loan facility for a short term. ....
Source:
http://www.recruiterdaily.com.au/nl06_news_selected.php?act=2&stream=All&selkey=
There`s nothing wrong with reminding clients about invoice payments before they`re due, he says.
"It depends what your terms of trade are, but assuming they`re 30-day monthly accounts, then especially in this market, it`s good even halfway through the month to call clients up to make sure they`ve got the invoice and there`s no issues with it."
Sometimes, he says, businesses wait 30 or 60 days before calling a client who then points out an error on the invoice and asks for it to be re-sent.
"And then of course the clock starts ticking again. You don`t want to wait that long, so… perhaps in the middle of the month or the third week at the latest, give them a call and check that it`s all in order and will be paid within the normal cycle."
And don`t stop there, Alley says. "A week later give them another call and say `I understand this is going to be paid next week`, just to make sure there`s no issues and problems, and perhaps even on that week give them another call and say `I understand this should be going through tomorrow`, and mention you`ve got some payments to make.
"It`s the `squeaky wheel` [theory] - if you keep ringing up and pestering, eventually you`ll get it, and hopefully you`ll get it in your 30 or 35 or 40 days, not 60 or 65."
Next steps
When the due date comes and goes but the invoice remains unpaid, the next steps you take depend on your relationship with the client, and how much you value their ongoing business, Alley says.
The first step should always be to call the client and remind them the payment is required. If an accounts person keeps ringing and getting nowhere, the job should "move up the line", Alley says, to someone who has a relationship with the client.
"A lot of people are struggling with cashflow," he says, "so if that`s the case it`s better to find that out and maybe do a deal with them. The option might be to say `can you pay some of it?` - so maybe they pay 80 per cent when it`s due and you can agree to defer 20 per cent for 30 or 60 days, so at least you`ve got some money in.
"I think the best thing is to work with the customer or the client so you keep the good relationship, and really only after perhaps 60 or so days then you`d perhaps give it to a debt collector and start that process off so it`s out of your hands."
Debt collectors, he says, will charge an amount to chase the payment for you, but he warns against engaging them if you have a good relationship with the client. "You wouldn`t want to do that too soon, or threaten legal action; all those sorts of things you can do later on."
Debt collector alternatives
One alternative to engaging debt collectors is invoice discounting or factoring, Alley points out, but not many small businesses seem to know about it.
Factoring effectively involves "selling" your invoices to a financial institution or a bank, and they typically pay you about 80 per cent of the balance owing upfront. "Usually anything over 90 days they won`t include," he says, "but if it`s fairly current they`ll pay you that amount of money."
You can continue chasing up the payment yourself, he says, or you can let the bank or other institution do the chasing. "Most people like to do the chasing themselves because it`s [better for] relationships, [or] you lose the business. [The institution will] charge you a fee - maybe 2% of your debtor`s balance - but it`s better than not having the money and possibly having an overdraft and things like that."
Recruiters who want to explore this option should contact their bank manager to be put in touch with the relevant department. The bank will assess the business and provide a costing for free, Alley says, "so you can then decide what you want to do, and go to someone else if you like".
Get to know your bank manager
Every small business owner should know who their bank manager is and meet with them regularly, Alley says.
"Even if you don`t have any overdrafts or borrowing facilities it`s worthwhile, but especially if you have a loan or overdraft you need to be in constant contact. Then if for some reason the overdraft keeps increasing, if you keep your bank informed upfront it`s much easier.
"Give them a phone call every month or maybe have a catch-up every month, or two or three, depending on how much business you`re doing. Banks usually have a formal meeting on a regular basis if you`ve got a loan, but you don`t want to wait until that situation.
"You want to liaise with them, and then if you do need some money - like in a situation where your debtors aren`t paying - then maybe you can get an overdraft or increase your loan facility for a short term. ....
Source:
http://www.recruiterdaily.com.au/nl06_news_selected.php?act=2&stream=All&selkey=
