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Keep that Cash Flow Coming In – 8 tips to collect cash from customers more effectively

11 July 2016 | Published by AME

Businesses often sell to customers on credit, offering them credit terms of between 30 and 60 days for the specific product or service they provided.

Collecting the cash from these customers (also known as debtors or accounts receivable) can be a huge pain and very time consuming, but there are some practical steps you can put in place in order to make the process more seamless and keep your cash flow regular:

  1. Only sell to approved customers. How do you know if the company or person you are selling to is able to make payment on the invoice? Put measures in place to vet potential customers to ensure that they are credit-worthy.
  2. Keep records of the specific service or product that was provided to the customer so that there can be no doubt or question of the validity of the invoice at a future date. Keep copies of signed delivery notes, signed registers, or even photographic evidence of the service or product delivered, if need be.
  3. Send invoices and statements promptly. Often customers claim that they have never received an invoice or that they are still waiting for a statement. Ensure that your accounting system and the individuals responsible for processing transactions are working efficiently.
  4. Reconcile your debtors weekly – not monthly. This will put you in a much better position to see which customers have paid and which are still outstanding. Many companies allocate payments daily on their accounting software.
  5. On the day payment is due, if it is has not yet reflected in the company’s bank account, CALL and ASK for the money. Don’t email. CALL!!! People dodge emails, but it is far more difficult to dodge a phone call. You can follow up your phone call with an email documenting what was said.
  6. Ask for a payment confirmation once the payment has been made. Customers often claim the payment was made and suggest the problem may be on your side in picking up the payment. Insist on a payment confirmation. This is standard today. All banks offer the option of sending a payment confirmation to the recipient when the payment is made.
  7. If a payment confirmation has not been received 2 days since your last call – CALL AGAIN! Companies often feel embarrassed to ask for money. The money is your money and is due immediately. It is the customer who should feel embarrassed – they have used your product or service without having paid for it.
  8. If after numerous calls and follow-up emails, the customer has not been forthcoming and has not offered a valid and acceptable explanation for late payment – don’t hesitate to hand the claim over to your lawyer. This gesture lets the customer know that you are serious about recovering what is due to you.

Following these 8 steps will make it easier to recover payments from your customers and keep your cash flow regular.