As a business owner, you know how important cash flow is.
Whilst you might have healthy financial systems in place and the best of intentions for making sure you have enough cash on hand, one thing you can’t always control is when your clients will pay their invoices.
Chasing payments is time consuming and not a particularly pleasant task, so the aim is always to get paid on time. But when a client won’t settle their debt, there are good and bad ways to handle the situation.
Here are some practical tips for getting your clients to take notice of invoice due dates.
Run some background checks
Before you start a working relationship with a new customer, it pays to spend a bit of time running a background check on them, particularly if you know you’ll be doing a lot of work for them.
Check ASIC for their business details, then run a credit history check on them through a reputable credit check company. Depending on what you find, you can make a decision about whether or not to work with them.
Outline your terms
Creating an account for your clients and giving them credit is fine, but remember, you’re not a bank or lending facility. If you know they’ll settle their account in full at the end of every month (and they have a proven track record of doing so), then there usually isn’t a problem.
However, you need to make sure you have tight written policies in place that outline your terms and conditions for payment. In particular, your policies around how credit is extended, on what terms, and what happens once payment is overdue, need to be very clearly outlined.
If you’re quite easygoing about sending reminders for overdue payments, your clients will be easygoing about paying you too! The saying “The squeaky wheel gets the oil” is often the case with payments too.
Make sure you send email reminders when it’s appropriate, call them on the phone and even visit in person when their account becomes very overdue. Usually this is all that’s needed to get paid.
Sometimes when a customer won’t pay you, it’s not because they don’t want to. Often they simply can’t.
If your customer is having cash flow problems themselves or are on the verge of collapse, you could offer to let them pay off their debt to you in installments. It creates good will, less stress for them and some money coming in for you.
Occasionally you will need to hire a debt collector to attempt to recover the money. Usually, a simple letter from a debt collection agency shows your customer you’re not mucking around, and payment is received soon after.
If this still doesn’t work, you may have to consider taking legal action depending on the size of the debt. Start by getting some legal advice to see if this is an appropriate route for you.
Cash flow help
While you’re waiting for customer payments, there is help available for real estate agencies in the form of a commission advance. This service gives you your commission payments up front without having to wait for settlement.
It’s a smart, cost effective way to keep money coming into the business when you need it, so you don’t go out of business because of someone else’s late payments.
Cash flow is the vein of any business, and with the right tools in place to manage your debtors, you should be able to sustain a steady monetary income.
Talk to us today about how a commission advance can help your business.