Five ways to keep collections on course
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Photo Credit: Images_of_Money via Compfight cc

 

If your cash flow is the lifeblood of your business, then your collections processes are the heart and lungs of your income – each invoice represents a deep breath, bringing oxygen into your company‘s lungs, while each received payment is a beat of your business’s heart.

 

Any interruption to this process, and you risk having your cash flow suffocated, preventing you from being able to invest either in your day-to-day operations, or in innovation and expansion.

 

Here are five of the best ways to avoid letting this happen, by keeping a continuing focus on your collections processes, and acting promptly when it appears that something has gone wrong.

 

1. Invoice Promptly and Accurately

 

Issue invoices promptly for work done, and ensure they are accurate – any discrepancies, and you may find them simply returned to you unpaid.

 

Give particular attention to the recipient’s name and address; in smaller companies, this may be the owner, but in large firms you may need to direct your invoice not to the person with whom you have the most frequent contact, but to a central accounts office.

 

2. Check for Receipt

 

It’s wise to make sure your invoice has reached its intended destination – particularly if it was sent by post rather than by the more immediate medium of email.

 

By asking for confirmation of receipt, you achieve two aims: firstly, you proactively remove the potential for the recipient to later claim that the invoice never arrived; and secondly, if they are reluctant to confirm receipt in the first instance, it may be an indication that they will be reluctant to pay on time, too.

 

3. Pursue Late Payments

 

It may seem obvious, but when a deadline is missed, it is important to chase the client for payment as soon as possible; the more promptly you pursue them, the clearer the message will be that they cannot get away with simply failing to pay you.

 

At this point, you must decide which course of action to take; for trusted clients who you believe have made an honest mistake, a gentle reminder may be all that is needed, while others may require more forceful action.

 

4. Know your Legal Rights

 

If you choose to take legal action to reclaim the money owed to you, you should make sure you know your rights.

 

For instance, you may be able to charge the client a fixed fee for allowing their invoice to run overdue, along with statutory interest on the amount owed, and any reasonable costs incurred in chasing the debt.

 

5. Join up your Credit Control

 

The single best piece of advice is to take a joined-up approach to credit control. All of the four suggestions so far are simply good practice; they should be part of the way you handle every invoice you issue.

 

By centralising your credit control, you can reduce the risk of an invoice or payment going astray, and ultimately cut down the administrative burden of handling your collections processes.

 

And if you still can’t find the time – or the inclination – to process your invoices and payments in-house, contact CPA to find out about our white-label credit control services, which can reduce disruption for businesses small and large alike by streamlining the invoicing procedure.

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