When you first started out in business, how much of your day did you expect to spend hunting down customers or clients who owe you money? For some business owners, collecting unpaid money is often a huge time commitment every day. It makes many people feel like debt collecting is their main job rather than their actual business.
This is one of those less discussed aspects of business operations – but it’s an important one. After all, it’s your money for services rendered. You want to get that money in the bank.
What options do you have for reducing your debtor collection periods? Below, we’ve outlined a few solid steps to help your reduce these debtor collection periods. Check them out and see how they can work for you.
When it comes to debt collections, sometimes the best strategy is the most basic one. Try this example on for size: reduce the payment terms into two simple options. Tell your customers that the minimum payment due now is 50%. But if they offer to pay the full balance now, offer them a discount of somewhere between 3% and 5%.
The incentive here falls on your customer. If they can get away with only paying 50% now, why wouldn’t they choose this option? If you’re giving them an incentive for full payment now, however, they now have a much more compelling reason to pay the full balance. The small discount won’t hurt your bottom line too much. But it will definitely help you collect your money more quickly.
The main thing to remember when dealing with debtors is the critical importance of consistency. You need to stick to your repayment terms without swaying if you want them to work for you. Even one instance of letting a customer get away with a smaller deposit could balloon into confusing and ineffective repayment terms. Don’t sway on your terms and watch how your average debtor collection periods improve.
Average collection times can vary wildly based on the industry you serve. Of course, there’s always room to improve those timeframes or better ensure your customers’ 100% repayment. One smart and simple business tactic is to meet your customers right where payment is most convenient for them.
For instance, at the end of a successful sales pitch meeting you could use your mobile CRM system to raise an invoice on-the-spot for payment instead of a mailing the invoice when you get bck to the office. Similarly, new smartphone-based EFTPOS technology is making it even simpler to connect on the spot payments directly to your business accounts.
By rethinking of payment collection as a direct component to your sales process (rather than an afterthought), you’ll see a much better turnaround in customer payments.
Business management & accounting software solutions, like MYOB Exo, can automate a large portion of the debt collection process for you. That way, you’re not spending an inordinate amount of time trying to chase down payments from clients and customers.
MYOB Exo can help you keep track of your debtors, set reminders for you and even send out email notices or other notifications to your customers. It also enables you to link all accounting data, client information, client orders etc. so you can have a quick overview of the full situation for each client before a follow-up call.
You can save a lot of time on your end by automating these processes. And most of your customers will likely respond well to regular reminders – hopefully improving your collection periods to get your money faster.
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