Debtor Management – Slow Payers cost you Real Money
Managing debtors can be a challenge for small and medium enterprises.
You know you have to get your debtors to pay, but do you understand the true impact of slow payers? Without a realistic picture of the direct and indirect costs of slow payment, your debt management practices may hurt your business. You may:
- Reduce your cashflow.
- Create a snowball effect – if debtors think you’re relaxed about payment, you encourage them to be slow.
- Build up an increasing number of debtors, leading you to let smaller debts slide.
- Chew up valuable time and resources in managing slow payers and following them up.
- What you can do
- If credit reporting information shows a customer is a slow payer, you can put tighter terms in place.
- Use online tools to manage receivables.
- Be straight up about discussing alternate invoicing patterns, payment options and terms.
Managing debtors – The right way to collect debt
Before you follow up on debt, you want to be sure you supplied the right goods and services, in the right quantities, to the agreed standard, for the agreed price and within the agreed time frame.
In collecting a debt, you must not use force or pressure, or harass or hassle anyone, or mislead or deceive the debtor. You must not pass on false or private information, and you cannot charge unreasonable debt collection fees.
Do not tell a debtor that they will be fined or face legal and court costs on top of the original debt. This is a breach of the Fair Trading Act.
One approach that’s proven successful is to visit slow payers and ask them how they are finding your company’s service. One businessman reports that with this approach he almost always got payment on the spot, or soon after.
Call us on (09) 425 7719 or visit our office at 5 Lilburn Street, Warkworth, to talk to our accountants. We can help make this part of your business go more smoothly. Managing debtors, cashflow, forecasting, budgeting, and reporting are all business services your local Warkworth Accountants offer.