Small Business Bookkeeping Deadly Sin #4: Allowing Customers to Buy on Credit and Then Not Following UpWayne Burgan
It makes sense that you would want to be paid for the work you do as soon as possible. But when you don’t take payment for your products or services at the time the transaction takes place, it can sometimes be weeks or months before you see your money.
This is a deadly sin I see business owners commit all too often! Here are some simple tips to help you get paid on time.
1. You’re not a bank, so don’t give credit if you don’t have to.
If you extend credit to a customer, you are essentially giving them an interest free loan! In the mean time you might personally be paying interest or find yourself short on cash while you are waiting to be paid.
2. Know your customers.
It’s important that you know whom you are dealing with before you consider offering credit to them. Do a reference check and find out what their history with making timely payments is like. A good relationship with your customers can help you get paid quicker.
3. Set up your terms and conditions for payment at the start
Set out the rules that will determine how you do business at the very beginning of your relationship with your new client so they know what is expected of them.
4. Get your invoices out on time.
The importance of invoicing straight away cannot be underestimated. Your invoice is basically the official record that the work has been done and money is owed to you. Your invoice should be professional, clearly stating the business name and your ABN. It should also CLEARLY state when the payment is due.
5. Make it easy for customers to pay you
Offering a range of payment methods will make paying you much easier for your customers.
6. Be professional and polite
It’s also surprising how a little professionalism and politeness goes such a long way. If you are using bookkeeping software, have a look at the different options and templates available to you and whether you can customise them to suit your business. Just having a professional-looking template for your invoices can make a huge difference. It’s also a great idea to add a little comment at the end such as ‘it was a pleasure doing business with you’.
7. Keep your financial records organised
Make sure you have an eye on all your invoices and payments so you can refer back to them if needed. A great way to do this is with invoicing software, which allows you to see any overdue accounts and keep track of when customers usually pay you.
8. Follow Up
If you’ve done everything right and your customer’s payment is still overdue, make sure you start your follow up process straight away. This could be a warning process with letters, phone calls and emails stating what the consequence will be if they don’t pay up. This will all depend on what process you have established in your business.
Just a few simple changes can speed up the time it takes you to get paid, help you know where your business is at and help you improve your cash flow at the same time.
Click here to read the introduction to “The 9 Deadly Small Business Bookkeeping Sins… And How You Can Avoid Them”
Stay tuned for Small Business Bookkeeping Deadly Sin #5 coming soon to our blog!