Every business relies on the revenue it generates to keep running. When there is a consistent flow of payments, a company can make plans, project its financial stability and maintain a happy workforce. Inconsistencies in cash flow force the business to rely on loans or use savings to keep it afloat. This is not a sustainable or a long-term solution. When clients don't make the payments on time, it's frustrating and can bring down the business if not addressed. We’ve collected some tips on how to track due payments and avoid a financial collapse.
By Team Savant
Image: Mark OFlynn
Hire a Collection Service Provider
You may not have the experience needed to collect the debt, and if you do, the time it takes can be frustrating. Instead, get a licensed and qualified debt collector who understands your industry well. For instance, a cannabis collection agency assists those in the CBD industry to make successful claims. It's not just about settling the debts but safeguarding the business relationship.
The collection agency has the required experience to gather all the necessary information and start a negotiation that leads to a successful settlement.
Make Consistent Calls
Even before you involve a third party like a collection agency, call to remind the client about the debt and ask them to make a payment commitment in writing. Most will let you know when they can send a cheque. Keep this in your diary and when they don't honour their promise, call again. Call as often as it takes for them to get tired of being nagged and pay the debt.
Offer Options
Most clients don't refuse to pay without reason. They may be going through financial difficulties meaning that raising a considerable amount of money at once is an issue. Probably, they have other creditors on their neck. To resolve the issue, call for a meeting.
Ask them how they would like to make the payments and let them commit in writing. Offer options such as making partial payments or reinstating their products supply so that they can make money to clear the debt.
It's always better to have measures in place to avoid such a scenario.
Have a Contract in Place
No matter how good your relationship is, always have a contract in place detailing the payment schedule, mode of payment, terms and deadlines. You should also agree on the consequences of late payments, such as charging a certain amount for delays.
Research New Clients
For a new client, do a background check before signing the contract. Learn about their credit rating and if there are any negative reviews or complaints against them. The internet has made it easier to perform a risk assessment of possible clients. Google their names, check if there are any notices of liens or court demand letters against them.
Ask for a Down Payment
A deposit is a sign of commitment to the business contract. Make sure to ask for a down payment of half or a third of the amount to reduce the risks. The client will have to pay because they need the products or services. However, demanding the payments when you have already done the work may be more stressful than when you ask for a deposit.
As you ensure clients make their payments on time, also work to sustain the relationship when it's a client worth keeping. Sometimes, they might be going through a temporary financial situation that will pass.