Six point plan for getting paid on time

One of the essential activities of a healthy business is good credit control. There is an old business saying: "Turnover for Vanity, Profit for Sanity" but the last line: "Cash is Reality" is probably the most important, so here are some ideas on credit control and collection strategies. Most of these may seem like common sense but we are always surprised about how few of these suggestions are actually put into practice. Adopting a co-ordinated strategy can often bring about a swift and significant improvement.

Six quick tips to improve cashflow:

1. Appoint one person to be responsible for debt collection - make it a priority within their role. 2. Credit check new customers and set credit limits, stick to them. 3. Make it clear when invoices are due for payment. 4. Send invoices promptly as soon as work is completed. 5. Send reminders when payment is due and again a week later. 6. Make sure the paperwork is supported by a call and ensure you get agreement on a course of action. Always follow-up.

Six point debt recovery strategy:

Have a plan for recovering late payments - especially from regular offenders.

1. Send regular statements. 2. Call to confirm the due date and that a payment will be made on schedule. 3. Establish a one-to-one relationship with whoever is responsible for arranging payment/drawing the cheque/authorizing the cheque run. 4. If you can't get a commitment to pay, make it clear when you will call again. Don't be put off by excuses, get agreement to a course of action. Make sure you call on schedule. 5. If all else fails, send a 7 day letter with a copy of the invoice, making it clear what action will follow if they do not pay within 7 days. Never make idle threats. 6. If all else fails, Instigate a claim through the County Court. The procedures are not too difficult and you do not need a solicitor. Often the issue of 'official' documents from the court will be enough to guarantee payment. Few credible businesses wish to gain a bad credit rating following a County Court Judgment. Using the personal touch is perhaps the most important part of any credit control regime. Make sure that when you call, the debtor already knows who you are, which business you represent and why you are calling. Creating a one-to-one relationship with the person responsible makes it easier to put your case strongly. If a company is struggling to make payments you need to make sure yours is at the top of the list!

For more help with cash flow strategies contact us: www.mercantile-group.com

Andrew Hawkins is the Managing Director of The Mercantile Group, helping SME's to turn ambition into reality.

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