Helpful tips for managing debtors

• Payment in advance – you can request a deposit or partial payment before you commence work for your client. A 50% up-front payment for custom products is certainly a reasonable request. In fact, depending on the product or service you provide, you could even ask for full payment before delivery. This certainly mitigates any risk of delayed payment.
• Cash-on-delivery (COD) – as the name suggests, this payment option requires payment upon delivery of goods or services. This is another helpful option to minimise payment delays.
• Progressive payments – if the service you are providing carries on for some time, you could implement a payment schedule. Rather than the entire amount being due at once, your client could make regular payments over the course of the job. This can help your client manage their cash flow, too.
• Seven, 10 or 14 day payment terms – start by assessing which of these terms would best suit your business and determine which clients you could offer it to… if you already have some late payers, then giving them additional time might not be a wise decision.

You must note that if you provide goods and services to certain types of clients, you might be subject to their internal payment cycle. For example, local councils, hospitals or schools usually have to send your invoice to a purchasing department and that could result in a significant wait for the funds. You should always discuss this with your client from the start, so you both have the same expectations.

Another useful feature in accounting software is automatic payment reminders. If you set up accounts receivable automation, you can include your payment term policy and the system will chase outstanding invoices based on the parameters you set.

You could implement automated emails that go out a specific number of times and at intervals that relate to the invoice due date.

A reminder two days before it is due and then regular overdue notices could help encourage prompt payment.

You might also want to set up an internal notification that alerts you to any overdue invoices. This way you can keep track of problematic payers or identify clients who might be having trouble finalising an invoice.

Finally, keep an eye out for warning signs that a client could be facing financial difficulties.

If you have a customer who is regularly late or doesn’t pay at all, pick up the phone and give them a call.

Talk to them about the situation and try to find a solution… work with them to determine the best arrangement that suits you both.

It’s wise to stop supplying them until they have resolved the payments and, if possible, refrain from engaging a debt collector or other action unless it is the last resort.