Ho ho ho. Nothing like getting bills during the holidays when you have so many other financial obligations.
Don’t let the spirit of the season soften your resolve to end the year with a positive cash flow. Now is the time when you should be following up with customers who have not arranged payment for overdue invoices. Once you get into the second week of December or so, it’s harder to get your customers’ attention.
Designate one employee as collections manager. If you’re a sole proprietor, that’s you. But if you have staff, have one individual:
- Keep track of delinquent payments.
- Make the collection efforts.
- Document their steps.
You don’t want multiple people making contact, and you don’t want any late payments to fall through the cracks.
Make sure the invoice was sent, was correct, and that the customer received it. If you have an email relationship with your customer, start there. Attach the original invoice. Explain that you’re trying to tie up loose ends before the 31st, and was the customer aware that there was a past-due invoice? That may be all you have to do for some individuals and companies.
Verify that there were no issues with the products or services. Maybe the customers didn’t pay because there was a problem with the merchandise or the services provided. Maybe they have paid and you just haven’t received the funds yet. Maybe the invoice went to the wrong person. Don’t assume they’re trying to avoid the obligation.
If you get no response within 24 hours, make a phone call. You know the drill here. Be polite and pleasant. Confirm that the invoice was received and the products or services were satisfactory. Ask when you can expect payment, and document the response.
In fact, document everything. This will be important if you eventually have to turn the account over to a collections agency. No answer to a phone call? Left a voicemail? No response to an email? If you connected, what did the customer say?
Preparing for 2018
Here are some things to consider that might minimize future collection efforts:
- Create invoices that display a call to action prominently. What does the customer owe? On what exact date is it due? What are the payment options? If you offer discounts for early remittances or apply finance charges for late ones, make that clear.
- Send invoices promptly. Don’t save them up to do in batches, unless the batch spans one business day.
- Don’t give 30 days to everyone automatically. There’s no rule about this. “Due on receipt” is too vague, and may actually delay payment. You can offer different terms to different customers, depending on the order size, customer history, etc.
- Follow up after five days. This both increases your chances of getting paid and makes clear to the customer that you’re on it: You do indeed pay attention to your receivables.
Be consistent. Develop your collection policies and apply them across the board. Still having issues? Contact your MarksNelson professional at 816-743-7700.