JOHANNESBURG - Cash flow problems and late payments are the biggest challenge for any business in the world.
With the advent of the coronavirus pandemic, small and medium enterprises, managing late- and non-paying customers should therefore be a top priority particularly for small businesses as concerns increase that some large corporates are adopting an unfair tactic of avoiding paying smaller suppliers.
Below are some tips to recoup owed funds from customers.
Terms
Always ensure that payment terms are spelt out clearly to prevent any confusion. Charging a certain percentage of the fee upfront as a deposit can also be a useful strategy for weeding out non-payments from the get go. Advise that services will be suspended when payment is overdue.
Invoicing
Have a streamlined invoicing process in place. While online tools and software can be helpful in this regard, ensure that the statements are simple enough to understand. Send invoices in a timely manner and make sure there are multiple easy ways to pay, such as e-payments and recurring debits.
Communication
Maintain constant communication and implement good customer service processes to improve your professional relationships with your customer base to limit late or non-payments.
Incentivise good customer behaviour through marketing strategies such as discounts for regular payments.
Deadlines
Remind customers that they have pending payments to be settled and resend invoices. Set deadlines within realistic time frames. If funds are still outstanding by that date, follow up again.
Processes
Understand that reasons for late payments can range from forgetfulness to bad internal processes. If, for example, customers are not paying because they are unhappy with your service, address this while chasing payments.
Enforcement
If all else fails, consider legal action by consulting a debt collection company or a lawyer to press charges. It is, however, important to perform an honest cost analysis that weighs up whether the legal fees incurred would be worth the risk, or if you should instead cut your losses and write off the debt.
Bierman is a managing director at Business Partners Limited.
BUSINESS REPORT