The year is coming to an end, and it is time to close your books. Unfortunately, you may have late-paying or deadbeat clients who need to pay you. Here are some tips on how to improve your receivables collection and avoid delinquent accounts:
1. The first step is to institute controls in your receivables to make sure that you collect everything that is owed to you. Send your client an invoice immediately after the completion of the contract or delivery of product. Track carefully your receivables to make sure you catch which those that are about to become overdue.
2. Prepare a contract or keep a record of what was ordered. One of the reasons clients do not pay is because they feel they did not receive what they ordered or you fell short in terms of deliverables. Having a contract puts everyone on the same page. If you made a mistake and sent them a different item than what they ordered, remedy the mistake. But remind them to keep their end of the bargain and pay you.
3. You may want to try to offer incentives to fast paying clients, e.g. if they pay within a certain time period, they can get a discount.
4. Inquire if they actually received the invoice. If a client doesn’t pay you, it may be because they are stalling, don’t want to pay you or because they haven’t received your invoice. Do not assume that they got the invoice. Call them and check whether they have received the invoice because you have not received the payment as yet.
5. Don’t fall into the “check is in the mail” trap. If the client uses this excuse, inquire when the check was indeed placed in the mail. Sometimes, you’d be amazed to find the check placed in the mail ONLY after you made your follow-up call.
6. Get to know the people responsible for cutting the check, especially if you are dealing with a big company. A one-person business is easy because you only follow up with one person. A big company, however, has more complicated accounting procedures where different people are involved in the processing of the invoice to the signing of the check. Be sure that you know who actually control the purse strings — and make your follow-ups with that person.