MAY 2013 | HIRE
AND
RENTAL
NEWS
| 31
INDUSTRY IN FOCUS
By Colin Porter, Managing Director,
CreditorWatch
If you’ve effectively taught a client they
have 60 to 90 days in which to pay you, it
is then very difficult to get them to start
paying on time. To avoid this, make sure
you and your client both agree to the
credit terms when you set a new account
up. This may include discounts for early
payment, or interest for late payments.
Communicate with your clients
Once these terms are in place, monitor
them by communicating with your client so
they are always clearly informed of when
they are expected to pay. It’s also good
practice to communicate about how late
payments will be handled. For example,
a three-step process may involve a phone
call at two weeks late, a letter of demand
at one month, and referral to a collection
agency at two months.
Be assertive
If a debtor is already out of hand, don’t
worry; you can still rein in your cash flow
cycle. A lot of businesses are scared to
request prompt payment because they
Retrain customers and improve cash flow
feel they will lose business by being too
demanding, and they let their clients
elongate the cash flow cycle.
You need to assume a more assertive
attitude, because once you’ve provided
goods and/or services, you’re working for
free until your customer pays you. And if
you don’t ask for payment when it’s due,
that client is paying another business.
Speeding up slow payers
So your client is paying at 90 days and
you want them to start paying at 30 days?
Changing their behaviour requires a
gradual approach. If you’ve let your clients
pay on longer terms, you have to work
with them to make changes; you can’t just
pull a stick out and start beating them.
Call them more frequently, and sooner
than you usually would. For example, if
someone is paying you regularly at 90
days, call at 30 days and say ‘The invoice is
due, can you advise when it’ll be paid?’
Another method is to start putting
pressure on them earlier. A week before
the invoice is due send them a reminder, or
call them up to make sure they’ve received
the invoice and intend to pay on time. You
don’t want to lose your client by changing
your credit terms dramatically, but explain
to them you need to be paid on time.
Dealing with exceptional circumstances
If there have been exceptional
circumstances that prevent your client from
paying on time, find out if what they’re
saying is plausible. Develop a payment
schedule and be clear on the consequences
if the installment terms are not met.
Be transparent
Lastly, let late payers know you are
accountable to someone else: you may
want to refer to a supplier waiting on the
payment to flow through, or mention your
accountant, business coach or a third party
agent. This puts performance pressure
on your client, because they know a late
payment will be visible to other parties.
CreditorWatch is a credit-reporting
bureau that gives access to commercial
credit files allowing you to identify bad
customers and better manage your risk.
HRIA members receive a 20% discount on
membership fees.
For more information visit website:
www.creditorwatch.com.au
HR