Are you concerned with your business’ financial health? Do your clients pay late, or sometimes not at all? Here are 7 ways to avoid bad debt and ensure you’re running a healthy, profitable business.
Lower risk factors by setting clear payment terms and conditions
Set clear terms and conditions for your clients about payment procedures, timelines and deadlines. Integrate consequences for payment delays into your agreements.
Maintain constant contact with your clients
Always be in contact with your clients, especially when payments are overdue. Send them reminders and notify them in writing when a payment is overdue.
Understand and track your actions
Send invoices to the correct people, to ensure prompt processing.
Restrict credit limits
Run a background check on a client before doing business with them. This is a vital step. But once you sign them on, take time to understand their needs and challenges, before offering any credit facilities. Set strict credit facility terms.
Find out reasons for delays
Your client may have reasons for the delays, find out what they are. Your priority is to find an amicable solution to settle overdue payments.
Assign debt collectors or lawyers
When the matter is out of your control, there are debt collection agencies that can be tasked to secure outstanding payments for you. Even your lawyer can get involved, to send an official final reminder to your clients who haven’t paid, after numerous follow ups. Adding a third-party puts additional pressure on clients, to take matters seriously.
Be strict yet flexible at the same time
Of course, every client may go through cycles, and sometimes, they may default. Be strict with your payment policies, however sometimes you’ll need to be flexible with specific customers that you highly trust and have a positive history in payments.
Keep in mind that taking preventive measures to avoid late payments, is easier than collection. Always make sure you seek professional advice and understand your business’s situation before taking any decision. A profitable business requires close management, especially when it comes to trade receivables.