This month we have a guest blog from Kevin Stansfield, Sales Director & Head of Coaching for ActionCOACH Solent. Kevin has over 30 years experience helping business owners and senior executives to realise their full potential and take their businesses to the next level of success.

In this blog, Kevin shares his best advice on the challenge of overdue invoices and effective debt recovery.

Business owners! If you are in a world of pain when it comes to debt recovery then this is a must-read. It’s time to turn things around and discover a less painful approach to the world of debt recovery – a topic that can be a bit daunting, but fear not, we’ve got your back!

When it comes to making sure your hard-earned money doesn’t get stuck in the land of unpaid invoices, prevention and action is the name of the game. So, let’s take a look at some top tips to keep your cash flow healthy and your debt recovery efforts to a minimum.

Pre-Sale: Lay the Foundation for a Smooth Transaction

Before you even make that sale, it’s crucial to lay a solid foundation for the transaction. Here are some tips to consider:

1. Thoroughly Vet Your Customers: It’s essential to know who you’re dealing with. For new customers, conduct background checks, on social media, get their accounts from Companies House, ask for references, you can even ask for then to send you a copy of latest management figures, a balance sheet is often enough to see if they are secure.  For bigger customers I would recommend proper credit checks via Credit Safe or similar organisation.  Remember there is never a guarantee so go with your gut as well on this one.
2. Clear Payment Terms: Don’t leave any room for ambiguity. Outline your payment terms clearly in your contracts and agreements. Specify the due date, payment methods, and put in a clause for late payments fees eg 5% per month.  If they questions just ask if they intend to pay you late?

After Sale: Keep the Momentum Going

Congratulations on making that sale! But your work doesn’t end there. After the sale is when the real debt recovery magic happens. Here are some tips to keep the momentum going:

1. Prompt Invoicing: Don’t procrastinate on sending out invoices. The sooner your clients receive them, the sooner they can pay you. Whenever possible send them before the end of the month, many people pay end of month following and this can add 30 days to invoices sent on 1^st of the month
2. Friendly Reminders & Statements: Send out friendly reminders before the payment is due. Sometimes, they have lost the invoice or details are not right that will hold up payment later.
3. Regular Communication: Building a good relationship with your clients goes a long way not only for more sales, but also to get early wind of problems, if you hear of any act quickly to get your money first.
4. Offer Incentives: if you need the cash quickly, consider offering discounts for early payments. It can be a win-win situation – your clients save money, and you get your cash faster, just make sure you don’t give your profit away or have cheaper forms of financing available.
5. Automate & Delegate: Invest in accounting software that can send out invoices and reminders automatically and delegate the activity so somebody who you know will focus on the task in hand.  Remember this is your money your customer has hold of, treat it that way.

Post Payment Date: Handling Late Payments Like a Pro

Uh-oh, the payment date has come and gone, but your money is still MIA. Don’t panic; there are steps you can take:

1. Turn up the heat: He who shouts loudest gets paid first.  It is rarely that your customer can’t pay you they just choose to pay somebody else before you.  If you keep on at them, they pay you to get rid of you.
2. Stay Professional: Even if you’re frustrated, always maintain a professional tone. Losing your cool won’t help the situation.  Debt collection is a process, trust your process.
3. Late Payment Penalties: If you set these up in step 1 you must now enforce them.  Send that late payment interest invoice and wait for the irate call.  Of course you can cancel it when they pay but if they feel the debt is getting bigger it is not long before they cough up.
4. Bring in the professionals:  Have on hand a professional debt collection firm or solicitor.  Once instructed they can claim their costs on top of your Invoice, so their service can be free.  This will show your customer you are no pushover, and they should pay you.  They will also have the skills to take it all the way to court, but if you act quickly enough this is rarely needed.

Remember, debt recovery is not about being aggressive but about finding a balance between maintaining good client relationships and protecting your business interests. By following these top tips, you’ll be better equipped to tackle debt recovery like a pro and keep your business thriving. Happy recovering, and here’s to a prosperous future for your business!

Great advice from Kevin!

If your cashflow situation is more challenging and you’d like a confidential conversation with our team, call us on 0808 196 8676.