No business wants to deal with bad debt, but it’s, unfortunately, more common than we’d like. You can protect your business by creating a robust payment infrastructure. Minimise your risk by following these simple steps.
1. Be cautious
Credit check new and existing customers up front, and keep files up to date. Failure to pay has a big potential cost to your business so this is a worthwhile investment.
2. Be organised
• Structure your payments with incentives for early payment or on-time payment, and/or penalties for late payment.
• Invoice on time.
• Chase late payments even in periods of high cash flow.
• Keep a good up-to-date database of customers, payment dates and outstanding payments.
3. Be legally smart
Terms and conditions of purchase are useful to define your requirements up front. Always get your payment terms agreed in writing with your customers. This makes sure everyone is on the same page and gives you legal support should you need it.
4. Take steps to recover debt
Make contact with your customer before and after payment is due. Review outstanding payments based on the number of days overdue and reason for late payment. Having a good understanding of both should create a clear path for how to recover the debt.