Good credit management is an important business strategy to maintain cash flow and stable finances. A cornerstone of managing credit is not only making sure an invoice gets paid, but gets paid on time.
Before a debt recovery process commences, which may delay payment and damage a relationship with a customer, it is worthwhile for businesses to use processes to avoid customer debt in the first place.
Making sure the customers understand their payment terms from the start is the first step in training them to keep track of outstanding invoices and payment due dates.
Keep detailed records
Businesses should keep all customer records such as payment term agreements, customer limits and outstanding sales.
Follow up regularly
Starting a ‘follow up’ procedure once a payment becomes overdue can help speed up the process. It is also very important to know exactly who to speak to about payment matters.
Most businesses adopt this policy in regards to payment procedures. This way the customer has a full amount to pay by a concrete due date. Sometimes ‘making it easier’ for the customer by staggering payments and due dates can confuse and delay payments even further.
For labour and time intensive work, some businesses ask for a part payment or deposit up front. This works as a way of showing that the customer is financially committed to the project and also allows a business to better manage cash flow.