Eight Successful Ways to Make Good, Your Bad Debtors

As a business owner, I understand that running a business requires multiple responsibilities and priorities. Being mindful of spiralling costs, new sales, existing debts, chasing new business opportunities and ensuring smooth account management for existing customers quickly becomes a constant stressor.

Bad debt can significantly burden businesses and, in turn, negatively impact cash flow. However, with the right strategies in place, I can help your business reduce bad debt and improve its overall financial health. I have identified the following eight points to help make good your bad debtors:

1. Process

Putting processes such as Accounts Receivables, Credit Control, and Customer Accounts at the forefront means that correct procedures are followed. By having controls in place, you are better equipped as a business owner or decision-maker, ensuring you have the confidence to reduce bad debt immediately.

2. Credit Limits

Always apply credit limits appropriate to the product or service you sell to the end user and consider implementing a loss factor from the beginning. New businesses and those who have failed to maintain regular payments are allocated a high-risk rating and a more sensitive credit limit. However, the discretion is yours.

3. Efficient Invoicing

Ensure that invoices are issued promptly. Without an invoice, customers are not likely to pay. This is obvious, but sometimes the little things get missed in a big business operation. Automating invoicing process using accounting software saves time and effort. Automation is an excellent tool to streamline invoicing process and reduce the chance of errors. Automating invoicing can also help speed up the process and reduce the time between sending an invoice and receiving payment.

4. Follow-up Process

In my experience, I have learned that many businesses will not deal with invoices unless they are chased. For invoices to be paid promptly, having a structured follow-up system only makes sense to get debtors to pay on time. The most effective way to communicate this issue is still by picking up the phone. However, this is not my go-to method anymore.

5. Send a Letter

Letters have an effect, too, like that of efficient telephone chasing! These are more likely to be documented by the business than an email. I strongly advise implementing more than one method of chasing.

6. Audit Trail

If a customer feels they have not received good service or their payments have not been allocated correctly, they may request a Statement of Accounts. A Statement of Account will show, in detail, all their payments. For start-ups, an Excel spreadsheet will suffice. However, obtaining a CRM system that does this automatically is better as businesses grow.

7. Evaluate Payment Terms

Evaluate payment terms and ensure they’re realistic and reasonable for your customers. If the terms are too tight or too lengthy, it may affect your cash flow and result in bad debts. Ensure you communicate your payment terms clearly to your customers so they know what’s expected of them.

8. Payment Option

Provide your customers with multiple payment options to help improve your collections. Customers expect to pay online, so offering an online payment gateway can make it easier for them to pay. Also, consider offering different payment options like a credit card, PayPal, or bank transfer to provide flexibility to your customers.

If you need further assistance or would like to arrange a free, no-obligation consultation regarding existing business debts, please don’t hesitate to get in touch.