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 Starved of Oxygen Cash
A challenge to many small businesses is getting paid by customers. Cash is like oxygen to a business and without it your business could die.
Sometimes, even great businesses fail due to the starvation of cash.
So I would like to ask – do you have a debt recovery system?
If you don’t do anything to chase those who owe you money then it’s unlikely you’ll ever get that money.
Here are a few points to think about:-
·         Firstly what are your payment terms? 30 days? Is this really necessary? How about reducing to 7 of 14 days or where possibly upfront payment.
·         Water, phone etc. are cut off if not paid for so stop providing services to any bad payers immediately.
·         Dedicate a member of staff or allocate one day a week/month to chase debtors.
·         Get accounting software that provides a debtors report showing how long they are overdue i.e. 0 – 30 days, 30 – 60 days, 60 – 90 days.
·         Be prepared when you call debtors, make sure you have account details and invoice numbers in front of you and always make notes of when you called and of what was said. Then set a diary date to their next call.
·         Always speak to the right person – if you sell business2business speak to the person responsible for paying you, if they can’t help go above them.
·         Write a standard overdue letter and post with a statement.
·         If dealing business2business check before you take the job what their payment terms are and get a Purchase Order number & place this on all correspondence to them.
·         If a customer is struggling would you consider taking part-payments or a settlement figure, remember 80% of the money is better than 0%.
·         Don’t be afraid to stop dealing with a bad payer. Fact: 20% of customers will take up 80% of your time. Give up that bad paying customer and replace with one in in the 80% bracket.
Thanks for reading.
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