What is the old saying, “Start as you mean to Continue”? It is safe to say that when we go into business, we never anticipate that customers will not pay their accounts, either due to forgetfulness or just bad business practices.
Whether you provide products or services or both, setting up a strong framework of policies and procedures will ensure each of your customers are categorized correctly therefore reducing your exposure to bad debt.
Payment Types
There are quite a few options when it comes to establishing a payment structure for your business and it can depend largely on the sector your business sits in.
If you are a product-based business, receiving payment either in full or deposit with balance to be paid on collection ensures that you a re never out of pocket and your cash to cash cycle works in your favour.
Service based businesses operate best with payment on the day or payment in advance, prior to conducting business.
Larger production and manufacturing businesses establish progress payments, as it allows for payment as stages of work are completed.
Larger businesses prefer to trade with others on an account basis and this is where your framework for Credit Terms and Policies, comes into play.
Credit Terms and Debt Collecting Procedures
Prior to any business transaction, your terms must be clearly stated to ensure all parties understand expectations and that products and services will be delivered accordingly.
Some businesses will attempt to sail close to the edge and sometimes cross the line, in terms of paying on account. This is when well-trained Accounts Receivable staff become worth their weight in gold.
Their tenacity, strong customer service skills and firm but fair approach ensures your business cash flow remains positive.
By ensuring strong Credit terms, you can reduce the money that would need to be invested in chasing the debt because customers would only need subtle reminders.
Always ensure you have solid credit terms, great staff and payment types that suit your style of doing business to ensure strong and positive Cashflow